At first glance the minister of railways seems to have achieved the impossible. As the economy lurches with GDP growth slowing down to an estimated 7.1%, the railways seem to have not only successfully achieved targets but even exceeded them. Freight earnings, which account for almost two-thirds of the railway traffic revenues are expected to go up by 13.7% in the revised estimates for 2008-09 as against the budgeted target of 10.4%. This higher than anticipated growth is only marginally lower than the 17.9% growth in freight revenues in 2005-06 when GDP growth peaked at 9.3%.
Similarly the passenger earnings will grow by 11.2% in 2008-09 as against the targeted growth of 8%. Both these and other sundry incomes will ensure that the gross traffic receipts of railways will move up by 13.2% which is marginally higher than the budget estimates of 12.6% for 2008-09. One can attribute the 2008-09 achievement to the buoyant growth of revenues in the first nine months of the year and optimist projections for remaining months of the year. But obviously the railways have much more faith in the resurgent Indian story when it pegs total traffic earnings growth to 13.1% in 2009-10, when the economy is expected to bear the brunt of the global economic slowdown. This is certainly an ambitious target as the gross traffic earning targets in the first five budgets of the present railways minister was only 5.4%, 8.9% 9.6%, 12.8% and 12.6% respectively.
However, despite the generally optimistic scenario presented in the current year, there are shortcomings hidden in the details. For instance, the operating ratio of the railways, which is the ratio of total working expenses to gross traffic earning of the railways, and a good yard stick of efficiency, has shot up much above expectations in 2008-09. While the budget anticipated that the operating ratio will go up from 76.3% in 2007-08 to 81.4% in 2008-09, it has now actually shot up to 88.3%, the worst ratio in the five years of the present railway minister. And the budget estimates that it will now go up further to 89.9% in 2009-10. While one can blame the high outgo from the salary and pension benefits paid while implementing the fifth pay commission report and higher diesel costs for the surge in the operational ratio, it is valid to point out that the additional expenditure has almost wiped out at one go almost the entire improvement in the railway finances over the last five years.
This has also affected the mobilisation of resources for long term growth. Numbers show that though the railways has set a target of appropriating Rs 10,839 crore to the capital fund the actual amount appropriated was only Rs 4,964 crore, which is less than half of the budget estimates.
And there are other equally important lapses. For instance the numbers show that though the railways has a plan outlay of Rs 37,500 crore in the 2008-09 budget, the actual expenditure of Rs 36,773 was marginally short of the anticipated spending. And to make matter worse the budget has fixed the outlay for 2009-10 at Rs 37,905 crore, almost at the same level as in previous year. Perhaps it may be that the next government will raise the plan outlay when it presents the new budget. But then it will have to find substantial additional resources to fund the plan if the railways are to achieve the target of raising investment in the Eleventh Plan to three times the level of the previous plan, as stated by the railway minister.
The targets for the Eleventh Plan will also be difficult to attain if the railways continue to under spend in crucial areas that are essential for long term growth. A quick assessment of the numbers show that the railway spending in 2008-09 fell short of the budget areas in a number of areas like doubling of railway lines, computerisation, railway research, spending on wagons, bridge works, signalling and telecommunications and on the dedicated freight corridor. An inability to spend budgetary allocations over the year could also impair efficiencies and hurt profitability in the long run.
?p.raghavan@expressindia.com