A long-term perspective is vital for balancing Railway finances

Updated: Jan 31 2005, 05:30am hrs
When the Railway Budget is formulated, the minister is tempted to make it populist without consideration for available resources and the administrative problems involved. There is a controversy on whether the Railways ought to have continued in the private sector. Considering the expenditure involved and the resource constraints, the decision to bring the Railways under the government in 1924 was fully justified.

The Railways have to bear certain social obligations. They carry defence equipment free of charge and essential commodities are moved at concessional rates. Another constraint is when rail lines are to be constructed in backward areas and finances are obtained from the central exchequer. The Railways has to pay dividend on this. During my tenure as rail minister, I introduced the convention that all dividend liabilities be treated as prospective liabilities to be paid when development in the region takes places. There are liabilities amounting to Rs 3,000 crore arising out of social obligations. In some countries, a grant is given by the federal government to the railways to meet its social obligations. No such provision exists here.

The length of the railways has gone up to 64,000 km. More than one crore passengers travel at any given point of time throughout the country and the trains carry over 10,000 tonne of freight. Any financial constraint affects rail expansion.

Against this background, certain decisions which may not be popular but are helpful in the long run have to be taken. During Budget discussions, a large number of rail lines are demanded by representatives from various regions. It is here that a very firm decision is needed.

The construction of large rail lines must be done on a priority basis. This will mean concentration of resources on selected projects which, in turn, will reduce their gestation period and revenues will be available from these lines for passenger and freight traffic. This apparently unpopular strategy may become popular and the railways will become viable. I suggest that line construction be handed over to an autonomous corporation. Experience shows that such corporations have completed projects expeditiously, for e.g., Konkan Rail and Delhi Metro. Politicians have a tendency to interfere with the working of such corporations but this must be prevented.

From different regions, there is a pressing demand for new rail zones. As rail minister, I opposed the wanton proliferation of administrative zones. There can be reorganisation of the existing zones but introducing new zones will only mean more expenditure on infrastructure. There is not much benefit in it for passengers.

Any Budget has to take cognisance of the pressing problem of rail safety. Analysis of rail accidents shows that a majority occur at unmanned crossings. Even if safety devices are costly, they have to be introduced in the interest of the Railways and the passengers.

Very often, the Budgets populist approach evades its responsibility to mop up resources through freight and passenger fares. And when its done through supplementary measures, increases in freight and passenger fare rates are introduced, indicating that the earlier decision was wrong. In this context, in one of the status papers, a disturbing trend was revealed: that road transport is taking away a lot of business from the Railways. For instance, in 1950-51, the rail freight traffic was 89% and road-motor traffic was 11%. By 1996-97, rail freight traffic had reduced to 40% and motor traffic had increased to 60%.

A conscious effort has to be made by the Railways to reclaim its passenger and freight traffic. And in raising the rates, the principle of cross-subsidisation will have to be introduced. A long-term perspective is necessary to balance rail finances.

The writer used to be minister for railways and also finance minister