The first railway Budget of UPA-2?both popular and populist?seems to accelerate the downward slide in the organisation?s fortunes by applying a mid-course correction to the ?unrealistically high targets set in the interim Budget.? The operating ratio, a comfortable 75.9% in 2007-08 and raised to an unhealthy 89.9% in the interim Budget, has now been pushed to an unacceptable 92.5%. Even this is achieved by reducing the contribution to the depreciation reserve fund from Rs 7,000 crore to Rs 5,325 crore.

Yet, the annual plan has been raised to Rs 40,745 crore from Rs 37,500 crore the previous year, with a generous increase of Rs 5,000 crore in budgetary support and by drawing down to the dregs investible funds (the depreciation reserve, capital, railway safety and development funds). Although flows into these funds are Rs 9,028 crore, withdrawals are expected to be Rs 16,573 crore, closing with a balance of Rs 7,195 crore, marginally better than Rs 6,175 crore at the end of 2004-05. And market borrowings through Indian Railway Finance Corporation are also jacked up from Rs 6,097 crore to Rs 9,000 crore.

Adding to the problems are some entirely avoidable controversies like the financial results of the last five years or so. Former railway minister Lalu Prasad had claimed that investible funds during his tenure totalled Rs 90,000 crore. Investible resources meant allocations made from railway revenues to various funds and not just net surplus. From these funds, an expenditure of Rs 70,000 crore was incurred on relevant works. There is no need for any controversy if what is referred to is clearly understood. The accounts of the railways, which have been audited and certified by the comptroller & auditor general of India, bear out the correctness of the figures.

Incumbent minister Mamata Banerjee assured Parliament that the railways would come out with a white paper indicating its current organisational, operational and financial status based on its performance in the last five years, and develop a Vision 2020, along with a short-term and long-term strategy and plan of action to realise it. It cannot be construed as a fault-finding exercise.

It is not the first time that such an exercise has been done. In the late eighties, George Fernandes brought out a status paper on the railways. A decade later, in 1998, Nitish Kumar brought out another status paper. And a few months later, Ram Naik brought out a white paper on pending railway projects. None of these were fault-finding exercises.

The Budget itself is a mixed basket of goodies for users and concern for economists. World-class and ?adarsh? stations, multi-functional complexes for shopping, medical attention, bookstalls, communication facilities, budget hotels, underground parking and so on are welcome. But if these are not viable propositions, Ircon and Rail Land Development Authority, made responsible for creating such facilities, will drag their feet.

Business plans for railway workshops, modernisation of railway printing presses, special trains to carry perishable products like fruits & vegetables, expansion of the on-board housekeeping scheme, on-board infotainment services, environment-friendly toilets, sale of tickets through mobile vans as well as around 5,000 post offices, Yuva trains, Duronto non-stop trains and so on are also interesting.

But the viability of some of the proposals are debatable, like the possibility of deputing at least one doctor on long-distance trains, opening nursing colleges on railway land and medical colleges (the latter two under PPP), and taking over of the wagon units of Burn Standard, Braithwaite and Basumati Sahitya Mandir.

Among the policy issues, the one justifying railway projects not merely on economic viability, but also on ?social viability? need careful consideration because financial viability is of paramount importance for the railways? survival. It is not suggested that socially necessary projects should not be undertaken.

It only means that for projects that are not financially viable, dividend-free capital funds for investment should come from the government, with the additional condition that operating losses be borne by the government or the sponsoring authority until they become financially viable. It is a great relief that this is being remitted to an expert committee.

Several concessions have been announced: concessional monthly season tickets at Rs 25, an increase in student concessions, 60% concessional monthly season tickets for school students on the Kolkata Metro and so on.

But nowhere is there any mention of the financial implications.

Concessions are not objectionable per se, but since the railways is not a charitable organisation there should be enforceable limits on the corporate social responsibility contributions that it is called upon to bear. The financial impact of the social service obligations of the railways in 2008-09 is estimated at Rs 9,683 crore, a huge sum by any standards.

The Budget has also proposed several committees. But there is no committee to review the operating and financial aspects of railway operations. The last committee of this nature, the Railway Fare & Freight Committee, reported in December 1993. More than 16 years have gone by and there have been complaints from several major rail users in the steel, petroleum, cement and foodgrain sectors about opaque rate adjustments and criticism also by the comptroller & auditor general in two consecutive reports about ?surreptitious? changes in fares and freight through changes to additives and classifications, despite declarations about not increasing charges in general.

So, even for the sake of building confidence among users it is necessary to set up such a committee to review the operating and pricing practices brought into effect by the railways in the recent past. The committee can be asked to report on select topics from time to time as was done by the Railway Reforms Committee set up in the eighties.

Another missing topic is the much-needed accounting and costing reforms on which one of the previous Budget speeches devoted a full page! These cannot be neglected any longer.

?The writer is former financial commissioner, railways, and ex-officio secretary to the government of India