Union Budget 2017: To ensure safety, Centre will have to turn to surcharge on passengers

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New Delhi | Published: February 2, 2017 7:03:32 AM

How would Indian Railways generate funds for the proposed RRSK? They would need to take the same route as the last NDA government — a safety surcharge on passengers.

Finance minister Arun Jaitley has stepped in at the right time to save the railway network by according safety top priority. (PTI)Finance minister Arun Jaitley has stepped in at the right time to save the railway network by according safety top priority. (PTI)

An excellent Budget for the Indian Railways (IR). In fact, it is one of the best budgets for the railways since the last National Democratic Alliance government’s Railway Budget of 2001-02, which came to the rescue of the transporter with a Rehabilitation plan with an SRSF fund of R17,000 crore. Finance minister Arun Jaitley has stepped in at the right time to save the railway network by according safety top priority.

Instead of the then Special Railway Safety Fund (SRSF), we now have the Rashtriya Rail Sanraksha Kosh (RRSK) with a corpus of R1 lakh crore over a period of five years. The finance minister has mandated the government providing the seed capital for this fund, with the railways arranging for the balance resources from their own revenues or other sources. Almost the same prescription was offered when the SRSF was set up.

Now let us see what IR is doing with its revenues. Its Revised Estimates for Total Receipts in 2016-17 are R1,72,155 crore. IR needs money to meet the costs of running its huge network. Typically, the cost of operating train services —generally indexed as the cost of running train services per km—is R1.2 crore per km over its 65,000 km network. In other words, the Operating Cost alone is roughly R79,000 crore. Next comes the need for repairing and maintaining track systems, rolling stock, equipment etc. IR spends roughly R40 lakh on repairs and maintenance per running track km over 1,16,000 km and rolling stock.

In other words, a substantial 23% of its total revenues is spent on Repairs and Maintenance of tracks, rolling stock and equipment etc (R42,000 crore), in addition to the R3,500 crore allocated for depreciation reserve fund (DRF). In all, IR spends roughly R1,19,000 crore on operating and maintaining trains and track infrastructure. The leftover revenues contribute to various funds including DRF, pension fund and debt servicing.

With practically nothing left as balance revenues, how would the Indian Railways generate funds for contributing its share to the proposed RRSK corpus? They would need to take the same route as the last NDA government—a safety surcharge on passengers.

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What the FM and Ministry of Railways have not reckoned with are the nightmares that now await the Indian Railways. The fundamental issue being missed is the need to distinguish between maintenance and upgrade as well as modernisation. IR cannot stop at this moderate size corpus of R1,00,000 crore for investments and incremental increases in the Plan Outlay.

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