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  1. Getting Indian Railways back on track: Suresh Prabhu now has space to deliver a world class transporter

Getting Indian Railways back on track: Suresh Prabhu now has space to deliver a world class transporter

Had it not been subsumed in the general budget, and the Railways been asked to pay the government its annual dividend, as FE has reported, its operating ratio would have crossed 100—that means, at an operational level, the nation’s transporter is...

By: | New Delhi | Published: February 24, 2017 4:58 AM
‘On a business-as-usual basis, there is no way the Railways can, on its own, finance the Rs 1 lakh crore safety fund that finance minister Arun Jaitley said would be created over a period of five years. ‘

Had it not been subsumed in the general budget, and the Railways been asked to pay the government its annual dividend, as FE has reported, its operating ratio would have crossed 100—that means, at an operational level, the nation’s transporter is running at a loss and doesn’t have money to even run daily operations, forget about the large investments required to both grow the network and secure its safety. On a business-as-usual basis, there is no way the Railways can, on its own, finance the Rs 1 lakh crore safety fund that finance minister Arun Jaitley said would be created over a period of five years. To help fund this, for instance, the Railways will have to slash the R33,000 crore (in FY15) of passenger subsidies it gives right now—that’s 67% of total earnings from this segment. To that extent, Jaitley has done well to say future fares will be decided after taking into account what other modes of transport cost—in the case of the sleeper class, for instance, while buses charge 92 paise per km, the Railways charges a mere 57 paise; in the second-class category, buses cost 75 paise per km versus 38 paise in the Railways.

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Meanwhile, over the next six-eight months, as the Railways complete coal-mine-connectivity projects, this should boost freight volumes by 5-10%. Since this isn’t going to be enough to arrest the declining freight revenues, the Railways will have to continue to try and get long-term customers by giving retention bonuses and long-term discounts. The process of modern accounting, vital if the organisation is to function along commercial lines, has been completed in one division (Ajmer) and one production unit (Kapurthala), so rolling it out over the country over the next 12-18 months is critical. According to the Railways, the new organisational principles being introduced involve dealing with projects comprehensively instead of on departmental lines—this would mean, for instance, all work on the Delhi-Mumbai line will be done by all departments in the same time-frame; theoretically, this would mean traffic speeds on a fenced railway line on the route could be raised significantly over 18-24 months in order to make the passenger offering more competitive. Since the Dedicated Freight Corridors will also be completed by then, a really competitive Railways is unlikely to emerge for two-three years—with freight traffic no longer hostage to passenger traffic at that point in time, much faster speeds could help the Railways win back some part of the traffic it has lost. In the long run, as earlier Railway ministers have also pointed out, at least 30% of all revenues have to come from the non-fare segment—hotels, commercial complexes, restaurants, etc—so this means working in tandem with other government arms to ensure PPP partners get the requisite clearances on time. Now that, with the abolition of a separate budget, the Railways has less pressure to create new trains, Suresh Prabhu and his team should be able to get the space they need to deliver a world-class national transporter.

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