Merger of Union Budget 2017 with Rail Budget: Thanks to PM Narendra Modi, Railway Minister Suresh Prabhu, Indian Railways freed from legacy problems

The long-awaited rail tariff regulatory authority, if in place, would have helped fix tariffs, as the merged budget wished

Much to the credit of prime minister Modi and railway minister Prabhu, IR has been largely freed from the serious legacy problems of stark populist genre, familiar shenanigans of ever new freebies, new rail lines, new passenger trains, new surveys, et al. As a big boost to rail reform, they scrapped the 92-year anachronistic separate annual rail budget, a “bizarre system introduced by the British colonial government” (The Economist); initiated the inception of game-changing bullet train corridors; developed a Mission Raftaar for accelerating freight and passenger services, and instituted re-development of stations.

Suresh Prabhu has strived to garner finances through enhanced budgetary support, loans from LIC and multilateral agencies, joint ventures with states, PPPs, rupee bonds in international markets, besides his quest to up the non-fare revenues. Strengthening of selected corridors and expansion of the network has been accelerated, as evident also in the 2017-18 budget allocation of Rs 1,31,000 crore (including ever highest budgetary support of Rs 55,000 crore) for IR’s capital and development expenditure.

Assuring of ‘functional autonomy’ of railways to continue, the unified budget has been realistically cautious in pegging freight to rise just 72 mt next fiscal over the depressed output in the current year, and growth in passenger journeys to remain just about flat. This falls far short of the optimal levels needed for the growing economy. The challenge for Railways is to embrace creative destruction, invent for the future, not just preserve the past.

IR needs exponential capacity enhancement for traffic growth and freight tariff reduction. It needs to reorganise the management structure by businesses—segregating freight from passenger; expedite the provision, as reiterated also by the budget, of integrated multi-modal ‘whole journey’ service, with pre-fixed departure schedules and guaranteed transit; shed the flab that weighs down its financial viability and capacity to remain fighting fit; examine the feasibility of even abolishing divisions, as China Rail has done, and marginally increase number of zones; restructure management cadres to be conducive to their functional integration; reform its recruitment and promotion policies that have over the years become bizarre; articulate role of finance as in a corporate enterprise; and corporatise and privatise development and manufacture of railway equipment, also construction.

Danger is the future. The dynamic of competitiveness in marketing of products is now a new law of development. On the passenger side, IR already faces severe competition from budget airlines and from new style, high-capacity buses, besides the burgeoning personal car fleet. In years to come, there will be changes in traffic patterns: NHDP’s GQ network is progressing; new technology vehicles are getting on road. Likewise, for freight, high capacity trucks carry goods door-to-door. More and more pit-based power stations will come up—rail haulage of coal over long distances will diminish. POL traffic will further dwindle as pipelines connect refineries with consumption centres.

Already, the signal light for IR is bordering on ominous red. Its freight lifting of 809 million tonne during the period April-December 2016 was 5.64% less than the budgeted 857 mt, even lower than 815 mt lifted during April-December 2015. Freight earnings at Rs 74,926 crore in the current year are short by 13.55% from budgeted Rs 86,667 crore, and lag by 7.12% in comparison with last year. On passenger side, although the cumulative 6,179 million rail passenger journeys during April-December 2016 just about hit the budgeted 6,157 million mark, but earnings from passenger business show a decline of 9.14%—Rs 34,536 crore vis-a-vis Rs 38,009 crore. Earnings from parcels and luggage recorded a 29.32% fall, that is, Rs 3,250 crore against budgeted Rs 4,598 crore. Understandably, IR’s gross earnings in the year so far have a 13.44% shortfall—Rs 1,16,763 crore against the budgeted Rs 1,34,892 crore. The expenses continue to maintain a spiralling trend: its working expenses during the year have already escalated by 14.61% over those last year—from Rs 85,198 crore to R97,647 crore.

Now for the first time IR is talking of ‘a fool-proof system’ to make rail travel safer, for which the 2017-18 budget provides for a Rashtriya Rail Sanraksha Kosh with a R1 lakh crore corpus over a five-year period. Safety is intertwined with system-wide reliability, rigorous attention to detail in inspection, maintenance and operations at all levels. Even a rule-based contribution to annual depreciation reserve fund has been habitually denied for specious window-dressing of operating ratio. Over 10% of the existing network capacity can be unlocked by ensuring a zero-failure of fixed and mobile assets. But IR’s assets failures, impacting train operations, have shown a disturbing trend: rail track failures (rail fractures and weld failures) increased from 1,976 during April-December 2015 to 2,404 in April-December 2016; diesel and electric locomotives failures from 3,074 to 3,521; detachment of passenger coaches from trains on run from 58 to 68; failures of overhead electric wires from 185 to 374; and of signalling equipment from 85,397 to 1,00,380.

Underscoring the imperative to “reorganise, restructure and rejuvenate” railways, Minister Prabhu’s 2016-17 Rail Budget speech charted the road-map: for example, reserved accommodation on passenger trains available on demand; time-tabled freight trains running with credible service guarantees; average speed of freight trains to rise to 50 km/h (from 23.70 km/h currently) and of Mail/Express trains to 80 km/h (from around 60 km/h); semi-high speed trains running along the golden quadrilateral; high-end technology to significantly improve safety. Minister Prabhu during his 2015-16 Rail budget speech invoked, “hey Prabhu, yeh sab kaise hoga”. We need to ask, “Prabhuji, yeh sab kab hoga”? The long-awaited rail tariff regulatory authority, if in place, would have helped fix tariffs, as the merged budget wished, on basis of costs, quality of service, and competition from other modes.

With enormous reservoir of talent and tradition of discipline, diligence and commitment, and capacity to deliver, IR still retains its aura as a great institution. If duly nurtured and wisely led, it will bounce back, like China Rail. CR lagged much behind IR; in just 25 years, CR has gone far ahead of the laggard IR, and emerged world’s numero uno.

The author is senior fellow, Asian Institute of Transport Development, & was the first MD, Container Corporation of India Ltd.

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