When under pressure, issue a circular. This has been a Rail Bhawan routine this past year since the last rail budget. The Indian Railways made repeated attempts to hike freight revenues. As many as 11 post-budget circulars were issued by the rail ministry to raise rates, and, as one might expect of a ministry proud of its ?dynamic? image, around a hundred odd changes were made to the rules governing rebates and surcharges. Equally volatile was the blood pressure of transporters of iron ore, the material that apparently exercised our pricing policy wonks the most. Thanks to such wheels within wheels, the original budget figures have all but lost their meaning. Anyhow, all is presumably forgiven, or at least will be, once railway minister Lalu Prasad presents his next budget in a few days. So long as there are surpluses as far as the eyes can see, more private players using the railway network, and a clear way ahead for mega-projects like the dedicated freight corridor, the minister will receive applause.
Yet, the railways must confront a basic imbalance in the system. The average fare per passenger km has remained unchanged for the last four years, whereas the freight rate per tonne km has gone up by almost half. Sure, passenger volumes have swelled, but freight revenues continue to subsidise passenger traffic heavily. If the railways must rely on their own sources of funding?central budgetary support has fallen from half their entire outlay at the start of the Tenth Plan to just about a third now?then their finances must be clear enough for bankers and investors to understand at a glance.
A system riddled with subsidies will find it hard to solicit funds for specific projects, unless they are hived off. What?s worse, the excessive burden on freight puts a question mark on the commercial viability of such operations. The railways must not lose freight traffic to road transport or shipping lanes. Current rail rates render railway freight transport uncompetitive for stretches below 550 km for heavy cargo and below 750 km for light cargo. The railways are in danger of pricing themselves out of the market. It is time to end the posturing that gives a few passengers free rides at the cost of financial sense. Economic realism must be in charge, not vain populism.