Three significant points justify optimism about the future of the national lifeline. Firstly, there is a hitherto unarticulated, but welcome, policy pronouncement. The railway minister has assured that there will be no privatisation of the railways. And the Vision 2020 document states: ?Activities other than core transportation activities could be corporatised to bring in the needed business focus and managerial autonomy.? The policy thus becomes clear.

Secondly, the minister has looked at both economic viability and social responsibility, with preponderant preference for the latter, but with a clarification that most of the projects proposed by her satisfy the first criterion of economic viability. And surveys of 114 long-pending, socially desirable rail connectivity proposals are to be updated before seeking Planning Commission?s clearance.

Through the Vision document a demand has been raised for an allocation of roughly Rs 100,000 crore out of an Accelerated Rail Development Fund (ARDF) to be set up by the government, to ?clear the pending backlog of socially desirable, New Line and Gauge Conversion projects.? This approach of the minister falls between Nitish Kumar?s assertion in the 1998 Status Paper that ?the major challenge of investment planning? on the railways is the balancing act between commercial needs and social obligations, and the declaration of another minister, Ram Vilas Paswan, that he was not bothered about financial viability of projects as long as they met the aspirations of people and their representatives. But nobody is bothered about who will bear the operating losses, till the lines become financially remunerative.

Thirdly, there is a belated reporting of the status of accounting reforms, almost as a direct reply to your author?s criticism about this being put on the backburner in the article ?Vision 2020: a workable goal for railways? published in FE on January 13, 2010. This project sanctioned in 2004-05 has been moving at a leisurely pace.

The minister now states that on completion of the project, ?a road map for future will emerge enabling phased migration to a new accounting system within the broad framework as envisaged by GSAB (Government Accounting Standards Advisory Board). As envisaged in the Vision, ?Accounting Reforms is seized of?activity-wise costing?to manage each service as a separate and distinct profit centre.? Separately, it has also been indicated that fully computerised accounting, focusing on improved asset-accounting and costing, will also be introduced. But all this will materialise only by 2020.

IR should treat this as a critical mission area, and find ways of achieving the reforms, in less than half the period now envisaged. Implementing it at a snails pace will ruin the railways beyond redemption.

The first post-Vision 2020 budget does not give a road map, or steps to be taken, to get near the several targets set in that document. Rail users would have willingly accepted moderate increases in charges for services, if they were told that the resources were required for investments to achieve the Vision targets. But as feared, the forthcoming West Bengal assembly elections and compulsions of coalition politics have had their sway. And, by rendering the finance function of the railway ministry ineffective, and disregarding with impunity the sane economic advice tendered by the Prime Minister?s Office and the Planning Commission, the rail budget has violated all economic principles, for satisfying some dubious political considerations.

The financial return of the new projects announced is a closely guarded secret! From Budget year 2007-08, only works costing Rs 250 lakh or more are to be itemised, and justification provided, in the Pink Book (Works, Machinery & Rolling Stock Programme of Railways). The items individually listed in Part I (Summary) accompanying the Budget documents do not reveal the financial return of any of them. When the then minister Ram Naik brought out a White Paper on railway projects in 1998, apart from mentioning that two-thirds of the pending projects were non-viable, the Railway Board was not willing to share information regarding the viability of individual projects. Transparency is sacrificed for political benefits!

Much has been written already about the parochialism in the sanctioning of projects and extension of services, to which I do not wish to add. But I certainly agree with a pungent comment by one of the authors that in addition to being a health minister, education minister, hospitality and cultural affairs minister, the railway minister also runs the Indian Railways! Such a comment is fully justified by the disproportionate importance given to setting up of hospitals, educational institutions, and cultural centres and so on.

Indian railways financial position is indeed parlous. The operating ratio, the ratio of expenditure over income, is projected at a high of 92.5, leaving just Rs 7.5 out of every Rs 100 for developmental works. Total revenue is less than Rs 98,000 crore, which has to be taken to Rs 2,70,000 crore by 2020.

Total Plan outlay improves only marginally from Rs 40,284 crore to Rs 41,426 crore. How will this be taken to a total of Rs 14 lakh crore in ten years, ending 2020? The internal, investible resources (not a wrong term in any way), comprising the resources in the Depreciation Reserve Fund, Development Fund, Capital Fund and interest thereon and the allocation for Open Line Works Revenue ? investments from all of which are treated as Plan investments by the Planning Commission under the grossing up procedure ? are plummeting from Rs 13,918 crore in 2008-09 to Rs 7,568 crore in 2009-10 and further to Rs 4,292 crore in 2010-11. At this rate, how will IR be able to raise Rs 8,96,000 crore of internal resources during the vision period? Is IR serious about implementing the vision document stipulations?

Heavy dependence on PPP is evident from the budget. Not only would it be necessary to counter the tendency of private players to manipulate the PPP arrangements to ?nationalise costs and privatise profits?, and ignore non-profitable projects, but also devise PPP terms and conditions attractive to the profit seekers. Railway expansion as such will not be attractive to PPP players, and we should not ignore international experience in this matter.

There is a general financial rule that whenever new services are introduced or projects are proposed, there should be a financial scrutiny, but this is being ignored when at least new services are introduced. A report in a Malayalam daily on March 8, 2010 states that the inaugural Duronto Express from Ernakulam to Hazrat Nizamuddin flagged off by minister of state for railways E Ahmed had 20 passengers in all! As far as projects are concerned information relating to financial viability are not disclosed. It is ardently hoped that the surrendered strength and influence of the finance function in the ministry of railways will be regained and used to guide the railway operations to profitability and prosperity.

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