Time to circle the rail wagons | india | Hindustan Times
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Time to circle the rail wagons

The railways will find it easier to pass on higher fuel prices in cargo, passenger fares will continue to draw demands for subsidy. The budget is chugging along in the right direction, but capacity-building may take a hit.

india Updated: Feb 26, 2013 23:27 IST

The railways are closing a dismal year with some improvement in their finances. Freight hauled is up less than 4% in 2012-13, when the economy is slated to grow at its slowest pace in a decade. The railway freight earnings have slipped by nearly 4% from budget estimates. Income from ferrying passengers is down by considerably more at almost 10%. The revision in fares in January after protracted political brinkmanship has obviously come too late in the day. Yet railway minister Pawan Kumar Bansal has managed to improve railway finances by slashing capital spending. Various targets for upgrading the network have been rolled back. Mr Bansal expects the economic slowdown to take its toll next year as well, his earnings target for 2013-14 is modest in comparison to that put out by Trinamool Congress ministers last February. He reckons traffic receipts will grow 14% in 2013-14, sharply lower than the 26% budgeted for this year.

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.