The Hindu : Let the wagons roll

Online edition of India's National Newspaper
Thursday, Feb 27, 2003

Opinion

Opinion - Editorials

Let the wagons roll

THE RAILWAY BUDGET does not contemplate an increase in either passenger fares or freight rates. On the contrary, through a process of rationalisation, passenger fares on certain trains will be lower. Freight on goods traffic will now be levied on a more scientific basis paying heed to commercial considerations. Other newsworthy announcements are the introduction of 50 new express trains and the extension of 13 popular trains. With several State elections on the anvil, the Government was probably precluded from taking tough but overdue measures to bolster railway finances and improve the dismal safety record. On the latter a white paper has been promised, a move as predictable as it is pedestrian. In trying to grapple with the financial aspects, the Railway Minister has to address certain complex issues that have dogged India's premier infrastructure undertaking recently.

Although not readily apparent, the Railway Minister, Nitish Kumar, continues to straddle several conflicting goals while presenting his second budget in a row. The Indian Railways now in their 151st year are in a state of transition. The reform era of the 1990s has accentuated the incipient competition and forced a reexamination of the way the Indian Railways are run. Long used to meeting social objectives, the Railways have had to reorient themselves towards the newer requirements of commerce without in any way diluting the former. That however is a very daunting task in the context of certain long-established practices and orientations. Though run as a department of the Union Government, the Railways have several common features with other vital infrastructure industries such as roads, ports, electricity and telecom. An organisational restructuring paving the way for an autonomy-conferring corporate model, however strongly justified on theoretical grounds, has not been practicable. The latest budget has disappointingly steered clear of such organisational issues. Probably there is a realisation that radical changes are not possible at this juncture. The experience of several other countries including the U.K. and Japan suggests a longer time-frame is needed to address those issues.

Hence, the immediate challenge has been to align the Railways' finances with the recent trends without losing sight of near-term goals. Over the recent past, the freight performance has been encouraging. On top of exceeding the targets for fiscal 2001-02 quite comfortably, this year too the goods traffic is projected to exceed the budgetary target of Rs. 26,118 crores by Rs. 540 crores. Passenger earnings have however been disappointing. These trends are especially noteworthy in the context of certain well-known anomalies in the pricing of railway services. Traditionally, freight on goods movement has subsidised passenger fares and long-distance passenger fares the short-distance passengers including commuters in the metros. Several experts have argued for improving the profitability of passenger business by bringing the user charge as close to the cost of service as is possible.

The budget while remaining silent on this has however heeded the other critical advice of rationalising the freight structure, a move that actually began with the previous budget. Almost 90 per cent of the freight traffic is accounted for by just eight commodities, coal, fertilizer, iron ore, cement, petroleum products, steel and steel products, and foodgrain. There has been a two-pronged strategy here of blunting the competition from road transport and becoming more market savvy. The budget furthers the process. The band of freight rates has been compressed. The steep gap between the freight charged on the highest and lowest class is being reduced and concessions offered on short-distance goods traffic. Welcome as these are, it is the realisation that market forces have to be faced head on that will distinguish railway finance in the years to come. For now, however, there is an overdependence on market borrowings, a modest faith in internal generation and limited contribution from the exchequer. Railway dues from State electricity boards are mounting while savings have been effected in working expenses. There is a strong case to reap more fully the benefits of a few diversification measures such as the laying of fibre optic telephone lines along railway tracks. The real challenge is to face the future with confidence while attempting to correct the past anomalies.

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