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Railways targets surplus as changes pay off

"The railways is like a cow. One has to take care and serve it. It's an asset," says Rail minister Yadav .

india Updated: Feb 21, 2006 18:50 IST

A century and a half after the first train rolled in India, the lumbering rail network, one of world's largest and busiest, has become synonymous with losses, delays and red tape.

Five years ago, a government panel said Indian Railways was on track for bankruptcy. Freight was lost to road transport and inefficient passenger handling and catering eroded revenue.

Now a turnaround scripted by maverick minister Lalu Prasad Yadav is expected to see the state-run railways, which carry 15 million people on 10,000 trains daily, post a record surplus of about $2 billion for the year ending March 31.

"The railways is like a cow. One has to take care and serve it. It's an asset," Yadav told in an interview last week.

"If you do not milk the cow fully, it falls sick."

Yadav hopes the railways will end the 2005/06 financial year with revenue surplus of 90 billion rupees before its dividend to the government, as a plan to better exploit the network's $20 billion worth of assets starts to bear fruit.

The minister is due to present the rail budget for 2006/07 on Friday. Indian Railways has its own budget, separate from the federal budget on Feburary 28, funded through passenger and freight earnings, market borrowings and some government support.

Rail is only part of India's wider infrastructure challenge. The country needs to spend tens of billions of dollars on power, water and transport just to catch up with other Asian nations.

Indian Railways is pulling out all the stops to turn a profit, from competitive bidding for catering to leasing out advertising space on railway buildings, stations and some trains.

It took home 130 million rupees from its 252 pantry cars in 2003/04. Having switched to competitive bidding last year, it has earned Rs 1.32 billion in 2005/06 and is on its way to wiping out accumulated catering losses of Rs 6 billion.

"We were running a charity as far as the catering services are concerned," a senior railways ministry official said.

"Charity because the contract for pantry cars was handed out at a paltry sum of Rs 400,000 while the cost incurred by the railways in running that pantry was Rs 10 million."

Romantic journeys, nightmare finances

With 63,000 kilometres of track, the network crosses some of India's most breathtaking scenery - from the lush tea estates of the south to the rocky deserts of the northwest.

But inefficient use of passenger seats led to a loss of Rs 45 billion on passenger services in 2004/05.

Now Yadav aims to push the load factor towards 100 per cent from 68 per cent by upgrading waitlisted passengers to fill unused upper class seats, which will also cut down on costly refunds.

"It is a myth that one can turnaround the railways only by raising freight and passenger fares," said Yadav, who kept fares unchanged in last February's budget.

The minister aims to increase rail's share of freight by cutting costs and turnaround time, appealing to businesses frustrated by the slow movement of their goods. Roads carry 85 per cent of India's passenger traffic and 75 per cent of freight.

"It is a good beginning. The railways have realised that they are losing ground and they need to pull up their socks," said SP Singh, senior fellow at the Indian Foundation of Transport Research and Training.

"Even now the attitude is bureaucratic and investors face huge problems when they want to use the railway network to transport goods. This needs to change soon."