Didi does a Lalu, but can she pull railways back from brink?
A whole host of public-private-partnerships (PPP), no privatisation, new business models and no hike in freight rates or passenger fares. Was that Railway Minister Mamata Banerjee presenting her second budget in the second innings of the UPA government or was it the spirit of her predecessor Lalu Prasad speaking?, writes Gautam Chikermane.india Updated: Feb 24, 2010 22:12 IST
A whole host of public-private-partnerships (PPP), no privatisation, new business models and no hike in freight rates or passenger fares. Was that Railway Minister Mamata Banerjee presenting her second budget in the second innings of the UPA government or was it the spirit of her predecessor Lalu Prasad speaking?
As an irritable and angry Mamata screamed out her budget — her fourth — I couldn’t help but see the ghost of Lalu in her 47-page speech, arguably the longest. In his fifth budget speech presented in February 2008, Lalu, riding the success of the PPPs he had successfully introduced in catering, had attempted to scale up the idea. “We want to have many more such PPP schemes where one and one make 11 and not two,” he had said.
In her speech, garnished with pleas, threats and complaints, Mamata took this further. “The time has come for the business community to come and join hands to build partnerships with the Railways,” she said, raising the status of PPPs to para 16 of her speech against Lalu’s para 45. “The need of the hour is to develop new business models and invite domestic investment through PPP.”
The second ‘P’ in Mamata’s PPP, however, is not enthused. “PPPs sound very great, but after Lalu, the PPPs in container traffic has all but ended,” a private container mover who didn’t want to be identified said. “They think we are their competitors.” Railways, for instance, has stopped giving permission to private movers to transport goods on private lines of cement or steel makers.
Besides, where is the money? Increasing railway lines by 1,000 km and doubling another 700 km will cost about Rs 7,500 crore. Add the 800 km of gauge conversion (Rs 3,000 crore) and the cost of laying lines in this year alone rises to Rs 12,000 crore (taking bridges or gradients into account). No private entrepreneur invests in ground infrastructure — they take too long to build and even longer to yield any returns.
Money aside, the country doesn’t have the technical capacity to build these tracks. To put these 2,500 km of lines in perspective, in 60 years of its existence in free India the Railways — that began operations in 1853 on the Bombay-Thane route — increased the route by about 10,000 km. To deliver 2,500 km in a year means a 15-fold increase in the pace of construction. It can be done with the economy growing at 8-9 per cent, but can Mamata do it?
The five dedicated freight corridors would cost Rs 250,000 crore, with all of it coming from government coffers, internal accruals or loans from multilateral agencies such as Japan International Cooperation Agency (the agreement for the main loan from it for the first phase of the western corridors will be signed next month). Again, while private investment will not come to finance these projects, Mamata has also introduced six high-speed passenger rail corridors. What her National High Speed Rail Authority will do here apart from creating more jobs, I have no idea.
By 2020, Mamata also plans to double the freight that the Railways will carry. That would probably mean doubling the number of rakes to 28,000. At Rs 12-15 crore per rake, this means an additional investment of Rs 200,000 crore. Private investment is possible and is probably her best bet to move PPPs in the Railways to the big league.
Beyond PPPs, the good news for entrepreneurs is the setting up of a special task force to clear investment proposals within 100 days, through policies that she has promised will be “easy, simple and investment friendly”. It’s early to comment on how that translates into action, but if the track record is any indication for future expectations, will she drive investors from Railways to roads, as she drove the Nano out of West Bengal to Gujarat?
So, while Mamata has adapted Lalu’s policies and attempted to scale them up, I don’t see the clarity of Lalu’s execution in her Budget. The instrument of PPP was a strategy in Lalu’s case — he had a surplus of Rs 13,000 crore. In Mamata’s budget it is a compulsion — she has less than Rs 1,000 crore.
Finally, this is the first Railway Budget I’ve seen, and possibly the only one ever, where last year’s operating ratio — a measure of the organisation’s health (broadly, expenses as a percentage of revenues) — has not been discussed in the minister’s spee-ch. It stands at an abysmal 94.7 per cent, versus the 75.9 per cent that Lalu left. The Railways is fast moving towards a financial precipice, ready to fall. Unfortunately, I don’t think Mamata can change its course.