Rail budget misses reform chance

Freight earnings target may be difficult to achieve, while public-private partnerships may not have been fully explored, HT reports. Political economy of Indian railways | Tracking the tracks

india Updated: Mar 15, 2012 00:09 IST
HT Correspondent
HT Correspondent
Hindustan Times
Railways,rail budget 2012,Public Finance

With assembly elections out of the way in four states and the national elections still two years away, this year's railway budget presented a chance for the government to push some much needed reforms. But it looks like a missed opportunity.

While the first hike in passenger fares in nine years stood out as the most bold step, the move to borrow from the market- a first for the Railways - is likely to put it under pressure.

"The increase in passenger fares was overdue, expected and welcome but more initiative and reform was required in the freight segment," said NR Bhanumurthy, professor at National Institute of Public Finance and Policyhttps://www.hindustantimes.com/Images/Popup/2012/3/15_03_12-buss25.jpg. "There is a huge volatility in financial markets, so I am not very sure if they would be able to borrow Rs 15,000 crore from the markets. Alternately, they should have explored the PPP (public-private partnership) route more intensely. Overall, it is a missed opportunity as far as reforms is concerned."

The budget digs into recommendations made by various committees including one by technocrat Sam Pitroda. The outlay has been raised to Rs 60,100 crore while the investment plan for the 12th Five-Year Plan has seen a quantum jump from Rs 192,000 crore to Rs 735,000 crore.

But not enough attention has been devoted to freight earnings, which contributes to the bulk of the Railways' earnings. The Railways carried 970 million tonnes of freight in 2011-12, missing the target of 995 mt.

"The budgeted freight earnings (growth) target for next fiscal at 30.2% may be difficult to achieve.....the share of freight in total railway earnings has declined from more than 80% in 1950-51 to 66% in 2011-12," said Rajiv Kumar, secretary-general, FICCI. "The finances of the Railways in the current fiscal may not be in ideal shape. Receipts-over- expenditure (surplus) has been revised downwards from Rs 5,158 crore to Rs 1,492 crore. This shows a sharp deterioration in railway finances, which is not healthy."

The Indian Railways' network is spread over 64,000 km, with 12,000 passenger and 7,000 freight trains each day from 7,083 stations that ferry 23 million travellers and 2.7 million tonnes of goods daily. With a turnover of Rs 106,000 crore, it is world's third largest railway network and one of the largest employers worldwide.

"The rail budget is a missed opportunity in a big way," said Ajay Mittal, chairman, Arshiya International Ltd. "On a scale of 10, it scores a 2."

First Published: Mar 14, 2012 21:26 IST