Mr Gowda, you are on the right track
The NDA government’s maiden railway budget is a realistic assessment of how the railways need to morph in a competitive environment; some of that sobering analysis finds place in Sadananda Gowda’s budget speech for 2014-15.comment Updated: Feb 24, 2015 11:21 IST
It is tempting in 2014 to set out a medium- to long-term vision for the Indian railway network. The Narendra Modi-led NDA government’s maiden railway budget is a realistic assessment of how the railways need to morph in a competitive environment; some of that sobering analysis finds place in Union railway minister Sadananda Gowda’s budget speech for 2014-15.
Capacity-building is vital if the railways are serious about reclaiming market share lost to highways and pipelines. For long India’s railways have suffered from low investment and populist policies to subsidise fares, turning the once-mighty system into a slow and congested network that crimps economic growth.
The ‘decade of golden dilemma’— choosing between commercial and social viability — has also led to a vast erosion of the enterprise’s balance sheet during 2004-14. The lack of prioritisation, over the last three decades, has dealt a telling blow to the finances.
Of the 674 projects worth Rs 1,57,883 crore sanctioned in the last 30 years, only 317 could be completed. Completing the remaining work requires Rs 1,82,000 crore. Capacity on this scale does not derive from incremental gains in loading wagons and turning them around faster.
A shared network for goods and people slows both down; Mr Gowda is on the right track when he goes out seeking private and foreign investment in vast swathes of the Indian Railways.
The government will allow FDI in high-speed trains and rail cargo passageways even for those that are operated through public-private-partnership programmes, which could pave the way for overseas investors to pick up equity in projects such as the Delhi-Mumbai dedicated rail freight corridor as well as suburban networks.
Mr Gowda had very little money to splurge in any case. Most of the gross traffic receipts are spent on fuel, salary, track and coach maintenance and on safety works.
The surplus, after paying obligatory dividend and lease charges, was Rs 11,754 crore in 2007-08 and is estimated to be Rs 602 crore in the current financial year. In the process, the railways’ operating ratio — the rupees spent to earn every extra Rs 100 — had deteriorated from 88.3 in 2008-09 to 93.5 in 2013-14.
Mr Gowda has pledged to bring it down to 92.5 and gradually. Eventually, the top line could have a significant upside if the economy picks up steam. Putting the railways’ land bank to better use, on-schedule delivery of time-sensitive cargo, expanded and modernised ticketing system, improved station infrastructure, and a vision statement would sit fairly high up on any business plan for the railways.
In the final analysis it is about laying down tracks for tomorrow. The railways need to build capacity now; think laterally about finances: This appears to be the central message of the railway budget.