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Lalu turns around Railways' fortunes

For the first time, Indian Railways is expected to report a healthy cash reserve of Rs 110 billion.

india Updated: Feb 23, 2006 15:22 IST

When Railway Minister Lalu Prasad presents the railway budget on Friday, it would signal the emergence of an administrator who has turned the fortunes of one of the world's largest rail networks.

For the first time, Indian Railways is expected to report a healthy cash reserve of Rs 110 billion (Rs 11,000 crore, $2.4 billion) after clearing the backlog of a Rs 35 billion dividend payout to the government, say official sources.

The cash reserves for 2004-05 were Rs 3.5 billion (Rs 350 crore). The healthy kitty has encouraged the railways to revive the Capital Fund after eight years to put aside Rs 20 billion to undertake infrastructure projects.

"An incremental freight loading of 110 million tonnes in just two years has contributed in a large part to the fiscal health," official sources pointed out.

The minister has already assured the people that despite the sharp increase in fuel prices over the last one year, no fare hikes are in the offing in his budget Friday, presented ahead of the general budget Feb 28 as has been the norm since 1924.

Lalu Prasad has his team working on various steps to reduce losses, including on catering through a tendering process on profitable routes and other innovative business plans.

"Over the 21 months, the effort of the railway minister has been to showcase the fact that his rustic sense in fact rivals the best of corporate minds," said a senior official.

"He has been able to disprove railway experts who had forecast that the organisation was doomed unless a drastic restructuring was done, including hiking the passenger fare. He has also proved to his critics that he is a good administrator and could have done the same in Bihar but for adverse circumstances," another official said.

Bureaucrats say that the minister has endeavoured to keep most of his 2005-06 budget promises - including the introduction of a high-speed train of 150 km an hour between Delhi and Agra early this month, frequent traveller scheme, automatic upgradation to higher classes to fill up empty berths with waiting list passengers and better facilities at platforms.

Though not announced officially, the minister has also got the nod for a new company to handle the Rs 220-billion project for setting up dedicated freight corridors, as indicated in President APJ Abdul Kalam's address to parliament earlier this month.

This ambitious project is expected to further boost revenues while helping the railways fight competition from the road sector.

Freight revenues, in fact, continue to subsidise travel for common passengers, who have been spared any hike in fare for the last several years.

During the nine-month period from April-December 2005, the railways handled 480 million tonnes of freight against the revised budgeted target of 670 million tonnes for the fiscal year and generated a revenue of Rs 258.67 billion.

For 2006-07, the railways is likely to set a target of around 800 million tonnes, with plans under way for public-private partnership to improve freight handling.

Apart from 14 per cent growth in freight traffic, the railways witnessed about 10 per cent increase in passenger traffic during April-December.

The demands on the railways have increased hugely in the years since 1924 when the first independent rail budget was presented. The railway board was constituted in the 1950s to help run the autonomous body.

Indian Railways, the world's second largest after Russia under a single management, is governed by a board of directors, which formulates an annual budget that has for decades been dictated more by its social obligations of providing connectivity and affordable travel for poor people.

Currently, about 14 million people use its 63,000-km network on a daily basis.

Designated as a strategic service and governed by a seven-member board of directors, Indian Railways operates over 15,000 trains daily including around 9,000 passenger trains.

First Published: Feb 23, 2006 11:57 IST