Capacity-building by the railways will take a hit, of course. Rail infrastructure calls for investments of Rs. 519,000 crore over the Twelfth Five-Year Plan. Of the Rs. 105,000 crore the railways are expected to spend towards upgrading track and rolling stock over the next five years, they have managed to set aside only Rs. 10,000 crore for the first year. Mr Bansal makes the point that a 5-6% increase in fares over the next decade could cover the gap that is opening up. Every other rupee the railways earn comes from carting coal, iron or cement and the country's infrastructure deficit should keep the railways in business provided it can handle it. Around a fifth of India's tracks are still meter gauge, rendering them unfit to carry cargo. Extra tonnage is vital if the railways are serious about reclaiming market share lost to highways and pipelines. And capacity on this scale does not derive from incremental gains in loading wagons and turning them around faster.
The railways are also moving towards flexible tariffs by separating fuel cost into a variable component. This makes sense with the government eliminating bulk diesel customers from the diesel subsidy earlier this year. The railways will find it easier to pass on higher fuel prices in cargo, passenger fares will continue to draw demands for subsidy. Mr Bansal has taken the unusual step of raising tariffs a month before he presented his first railway budget in order to bring operating expenditure below 90% of income. More such political will must be on display if the railways are to pull this ratio down to 74% by 2017-18.