Populist tinkering now, vision later

Written by Economy Bureau | New Delhi | Updated: Jul 5 2009, 02:35am hrs
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The flamboyance of former railway minister Lalu Prasad gave way to a rather conservative Rail Budget 2009-10 presented by UPAs new railway minister Mamata Mamata, who decided to continue with most of Prasads policies but clipped the freight loading to a more realistic target of less than 6% over that achieved in 2008-09.

For 2009-10, Mamata has estimated her cash balance will be 26.5% lower at Rs 14,201.27 crore. Accordingly, in her first Rail Budget presented under the UPA on Friday, she has decided to be prudent on the financial front, eschewing the lure of cutting passenger fares. She also left freight rates untouched. But she has managed to fulfill her earlier promise of providing monthly season tickets of Rs 25 to those with a monthly income of less than Rs 1,500called izzatalong with announcing fare concessions to students and youth while promising on-board infotainment on the Rajdhanis and Shatabdis.

Her largesse has been concentrated on West Bengal. She has extracted a series of projects for the state, including a new locomotive unit, a coach factory and another 1,000 MW power plant to supply dedicated electricity to the Railways; the first one was set up by Lalu Prasad in his home state Bihar.

Amrit Pandurangi, executive director of PricewaterhouseCoopers, said the budget lacked vision. She has done little wrong, but very little right too. There is no sense of direction in the budget.

The major plans announced in the budget include that of developing world-class stations (50 of them), multi-functional complexes, logistics parks, freight terminals and a cold chain, all of which will be through the public-private partnership route. Pandurangi said the plan for world-class stations was a sound idea that has been hanging fire for the last two years. They need to sort out the problems in attracting bids. Just an announcement is not enough, he said.

The arithmetic of the budget depends heavily on a massive dose of borrowings by its financing arm IRFC, of Rs 9,170 crore. This is Rs 5,000 crore more than that for 2008-09. To make them sail through, she has made Pranab Mukherjee revive the tax-free status for the papers. She has also cut down the funds for investmentthe capital fund by Rs 4,300 crore.

Despite this, the Railways estimates it will need to raise Rs 15,675 crore as internal resources along with a gross budgetary support from the exchequer at Rs 15,800 crore, to finance a plan size of Rs 40,745 crore.

On the earnings front, Mamata has announced a cut in the freight loading target for 2009-10 by 28 million tonne to 882 mt from the Interim Budget target of 910 mt. In her speech, she said the unrealistically high targets set in the Interim Budget are not sustainable and warrant a mid-course correction, although SS Khurana, chairman, Railway Board, was confident that the Railways would surpass this target.

The Railways will, therefore, exceed the revised estimate for total earnings for 2008-09 by only Rs 6,026 crore to Rs 88,419 crore. Of this, goods earnings are estimated at Rs 58,525 crore for 2009-10 while passenger earnings have been capped at Rs 24,309 crore.

With the implementation of the Sixth Pay Panel recommendations, the total expenditure of Indian Railways will rise to Rs 77,119.74 crore. In fact, 45% of the total spending by the countrys largest employer will be on staff costs.

As a result, the Railways operating ratiothe ratio of its earnings to its expenditure---is estimated to jump to 92.5% in this fiscal, quite a reversal after improving to 75.9%, at the height of the Railways financial turnaround in 2007-08.

However, Mamata on Friday promised to develop a long-term strategy for the Railways and develop a Vision 2020 along with short-terms and long-terms strategy and plan of action to realise it.

A top priority for her was passenger amenities. After taking over as railway minister just a few days back, I faced many complaints about deterioration in overall passenger services. Therefore, my priority areas will be a perceptible improvement in passenger amenities, quality of railway catering, safety and security and punctuality.

Not surprisingly then, the outlay on this head has been increased by 119% to Rs 1,102 crore that would include other than on-board infotainment, better catering, janata khana and for cleaner bedroll on trains, improved linen management.

The minister has also decided to fix the hugely unpopular tatkal scheme for booking railway tickets started by Prasad by reducing the booking window from five days to two. The tickets would now be made available destination-wise. Tatkal charges too have been rationalised and will now be levied as a percentage of the fare subject to a minimum of Rs 100, instead of minimum Rs 150 now. Environment-friendly toilets will also be introduced on several long distance trains.

On the plans for the dedicated freight corridors, Mamata was evasive. In her post-budget press conference, she said studies have been completed for four more corridors, but refused to set a timeline for their completion. Incidentally, the funds for the flagship Delhi-Mumbai freight corridor have still not been lined up. The Eastern Corridor is also way behind schedule, but Mamata said she will also develop an Eastern Industrial Corridor to be a rail based one. There will be a project monitoring committee to track the timelines for completion of railway projects and an innovative financing mechanism to develop even unviable lines.

The minister set a record of sorts by promising to develop 375 Adarsh stations that will have basic facilities, special pairs of trains for students called yuva with air-conditioned seated accommodation for long-distance journeys with flat fares of Rs 299 and Rs 399. She has also offered to improve container services, including private ownership of railway sidings.