Railways have a major role in transportation network of Bric countries. Though the sector faces competition from other modes of transport, it still has a central role in the economy. We compare the four economies to see just how, and how far ahead, they are with respect to this sector.
Brazil?s performance in railways stands greatly improved thanks to restructuring, privatisation and the investors who entered the sector. Two of them were underperforming, but the rest got more than they put in. But Brazil?s real lesson for India is that 56% of its 2002 World Bank restructuring loan went into financing staff retrenchment. That included early retirement, VRS, severance pay, retraining and placement assistance. The aim: to raise productivity.
Brazil succeeded hugely in that. Productivity actually rose, from 1.1 mn tonne-km per employee in 1996 to 4.9 mn tonne-km in 2002. No wonder its average long-run marginal cost fell by R$ 4, to R$ 36 per thousand tonne-km over 1996-2001?a 42% reduction in real terms, and contributing to an IRR of 64%. Nor, in fact, did the Brazilians cling on to surplus land, or lease it out; it embarked on sales of such land, while it additionally marketed non-rail assets to settle debts and liabilities. Brazil clearly leads India in that respect: it has no attitudinal hurdles.
In Russia, rail transport is already under siege from road transport in regions with a better class of road systems. Besides which, containers, perishables and high-value goods shun rails. But Russia, and her industries in particular, depend on Russian Railways (RZD). However, Moscow wants to unbundle RZD?s monopoly. In 1997 it announced the intent to divest departmental schools, hospitals and similar assets to local or regional administrations?followed up soon by new ideas of spinning-off departmental manufacturing units. Again, India needs to learn from that.
Moscow is also separating freight rates from the levy on long-distance passenger service?to do which the government fixes upper limits to freight charges. They clearly welcome hard budget constraints to disentangle official outlays from public service obligations.
Fares versus freight are, in fact, the common battleground in all Bric economies. But freebees are still the surest way of embracing indebtedness, delaying investments and pleasing none.
Next, the Chinese are now of the view that private capital should enter the railway sector to correct shortfalls and capacity mismatches in accordance with programmes setting out fresh financing and investment norms. And, even there we note similarities with the emerging Indian scene.
Beijing, too, wants to dominate trunk-line investments and operations while it permits investments into urban (or branch) lines. But matters are plainly coming to a head: job-migrants and others have wrought a rail-travel explosion?the direct instance of which occurred last January when the masses started queuing to buy passages home for China?s annual Spring Festival (January 26).
China?s railway ministry data supports that. It finds 3,00,000 to be the total daily demand for railway carriages?well above 2008?s daily average of 1,60,000. Yet, that is for a network that can only handle 1,00,000. There is, for instance, a proposal for three such (railway ministry affiliated) holding companies. Individually, they would deal with container handling, special cargo and express cargo transport, and the plan is to list them abroad.
But, until that happens, China?whatever its size?is on all fours with India. It overlooked freight haulage even during 10% growth and what has ensued is overutilisation, accelerated depreciation and a rise in mishaps.
Last Friday, an observer could be forgiven for thinking that the economy?s outlook was suddenly rosier from the way the BSE 30-share index ascended. It gained 254.56 points, to attain a high of 14,913 (1.7% over its previous close.)
Indeed, Mamata Banerjee?s Railway Budget 2009 is, in fact, just as much a child of the market as it is of the forces of ?inclusiveness?. As for the lowering of Interim Budget targets, realism plainly played a part.
The market, she evidently feels, can finance a bigger Railway Plan, and her budget says that it could be through market borrowings of Rs 9,170 crore?while Rs 15,800 crore comes from the exchequer.
Clearly, such filling and backing shows Banerjee?s belief that the slowdown will exact its toll on railway finances. Even the revised freight load figures suggest that. Banerjee has quite understandably been driven to conservatism.
Finally, Banerjee may have brought relief to the working classes?but she has also made industry sit up. It has been deluged by new schemes like Railway land for realtors, IRFC?s entry into the bond market, proposals for a Dedicated Railway Freight Corridor plus an Eastern Industrial Corridor, business partnerships with power units, the revival of Braithwaite and Burn Standard, fresh orders for wagons, new factories to manufacture locomotives and even Sam Pitroda?s inclusion to complete the Railway?s half-finished optic-fibre story.
But her budget still lacks credible disinvestment and labour rehabilitation plan. Only those will be able to stop activities that (a) occasion losses, (b) are archaic/inessential, (c) lower efficiency and spike labour productivity?and yet (d) have takers in the private sector. Brazil is doing such things, Russia is not?and China must start. So must we.
?The writer is a fellow at the Maulana Abul Kalam Azad Institute of Asian Studies, Kolkata