Build-up to budget

Populist schemes over years wrecked railways’ finances

  • Srinand Jha, Hindustan Times, New Delhi
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  • Updated: Jun 24, 2014 05:00 IST

The outgoing UPA coalition might be trying to embarrass the BJP-led NDA government on the rail fare/freight hike issue. However, the situation seems comical after factoring in outgoing railways minister M Mallikarjun Kharge’s hike proposal in his interim budget.

Ironically, Congressmen are protesting new railways minister DV Sadananda Gowda’s decision to implement the UPA government’s prescription.
The politics of populism associated with former railways ministers including Lalu Prasad and Mamata Banerjee — with just one and a quarter passenger fare hikes in the past decade —  have wrecked the railways’ finances.

The Railways operating ratio (paisa spent against every one rupees earned) has alarmingly hovered around 94% in the past years. Of every rupee earned by the public transporter, 52 paisa is estimated to be spent in paying salaries and pensions, 15 paisa in repairs and maintenance jobs and approximately 30 paisa towards meeting fuel expenses — leaving a mere 3 paisa for capital works.

Friday’s hike decision – which will enable the railways to mop up an additional `10,000 crore this fiscal — just about covers one-thirds of the annual estimated losses of `26, 000 crores it suffers in the passenger segment. “The present quantum of hike is, in fact, grossly insufficient”, former finance commissioner AV Paulose said.

The tendency to only blame “passenger losses” for the deteriorating state of rail finances, however, seems misplaced. Over the past years, the railways have done little to improve productivity and cut costs by making technological interventions to reduce fuel consumption and curtail inefficient operations.

“For an organisation that enjoys monopoly status and operates in a seller’s market, constant grumblings on funds shortage seem laughable,” an official said.

“The railways need to add value to its services to provide for a better travelling experience. If this happens, the travelling public does not mind paying more fares,” former Railway Board member RC Acharya said.

 

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