Issues before this years budget

Updated: Jan 31 2002, 05:30am hrs
There is a strange smirk on the faces of railway critics these days. We told you so. If the Railways continue with a populist approach they will ruin themselves, is what they seem to say.

Populist the budgets have certainly been, but have the Railways really ruined themselves Is there scope for their turning around Let us examine the issues before Rail Budget 2002-03:

PASSENGER FARES VS FREIGHT RATES: CROSS-SUBSIDISATION HAS LED TO FREIGHT GOING TO ROADS

The financial impact of the Railways social service obligation, as per the last Budget, stood at Rs 5,871.68 crore during 2000-01. Out of this, while Rs 5,624.87 crore is the loss incurred on coaching service, Rs 246.81 crore is the loss on essential commodities carried at below the cost of operation. If the staff welfare and law and order cost is deducted, the figure stands at Rs 4,000 crore. There is a general consensus on ending cross-subsidisation. Railway minister Nitish Kumar has acknowledged the need to hike passenger fares. Incidentally, a few months back, he had said in these columns that rationalisation of passenger fares should be adopted as a policy, irrespective of who is in power. However, senior railway officials, in private, doubt the good intentions of the political chair. Insignificant correction of cross-subsidy may happen with this years budget through a marginal hike in some categories of passenger traffic, with the upper classes inviting a higher increase.

LOW GROWTH IN FREIGHT VOLUMES EXPECTED WITH LUCRATIVE TRAFFIC LIKE POL BEING LURED AWAY
While the current year, as per Mr Kumars admission, may end with 485 million tonne (mt) freight loading (at a recent general managers conference he revised this to 490 mt) against the targeted 500 mt, officials expect a low 12 mt growth in volume next year. As per recent discussions that the Railway Board officials and user agencies held, there will be a negative 1 per cent increase in petroleum, oil and lubricant (POL) traffic. This is mainly due to the coming up of pipelines which the oil industry find more cost effective. However, it is expected that despite the low indications, freight target for 2002-03 will be fixed at 525 mt. How the Railways plan to achieve this is anybodys guess.

A LARGE SHELF OF PROJECTS, MANY OF THEM UNVIABLE
With the rail minister admitting that growth will get priority over viability, a large portfolio of projects will certainly be part of the budget. This is particularly true since besides annual budgetary support, the Railways will get money in the form of the Special Railway Safety Fund, as also funds for completing last-mile projects. Under both categories, the Railways got Rs 1,000 crore and Rs 898 crore during the current year.

REVENUE FROM NON-TRADITIONAL SOURCES WILL NOT MATERIALISE
Among non-traditional areas of revenue, Rs 700 crore was to come from leasing of right of way for OFC through RailTel. By the Railways own admission, it was not only too lofty a target, but is unlikely to materialise even next year. RailTel is still scouting for partners. Against a target of Rs 200 crore for land utilisation, earnings till December-end 2001 are only about Rs 77.63 crore. The Railways can hope to do better only if its plan of leasing out the right of way to oil and gas companies takes ground.

AT THE BEGINNING OF THE 10TH PLAN, A NEW DIRECTION IS NEEDED
Non-materialisation of most targets and the tight spot that the Railways are in bear proof of the fact that they have been chugging along on a short-term vision. Pointing out that a business organisation can hope to achieve profit only if its surplus is put in profit generation, a railway official expressed optimism that some sort of policy statement will accompany the budget speech this time.

Coming in a post-Assembly election scenario (polls are being held in four states in February), the budget may make some bold announcements, though these may not remedy the problem knawing at its finances. But it is now or never for the Railways. Its problems have not turned malignant yet. Hopes of revival in the 150th year of the Railways existence in India are still alive.