Dr Ashwani Mahajan
To take Railways out of near bankruptcy, the Government has made 7 to 40 percent hikes in rail fares from January 21, 2013. This decision of the Government would provide Rs. 6600 crore in the next fiscal and Rs. 1200 crore in the remaining part of the present fiscal year. Out of Rs. 6600 crore, hardly Rs 1000 crore are expected to be collected from AC tickets, as smaller hike has been made in AC fares. It may be interesting to note that a much lower hike was made in the Railway Budget by the then Railway Minister Dinesh Trivedi, which had to be rolled back by the Government due to stiff opposition from Trinmool Congress supremo Mamata Banerjee. With this doors for railways to save from the imminent bankruptcy were virtually closed and a loan of Rs. 2100 crore was also sought by the Railway Ministry from the Central Government.
Indian Railways has generally been a profitable venture, even contributing to the exchequer significantly, despite the fact that railways has been the cheapest mode of transport in the country. But in the recent past, news has been coming out that railway finances are in doldrums and that the railways is heading towards bankruptcy, as the deficit was getting unmanageable.
Railways had cash reserves of Rs 19,000 crore in 2007-08, a major portion of which got depleted with time and railways was left with only Rs 5,000 crore in May 2010. Financial results of railways in 2011-12 were again not very encouraging, and the revenue targets were not achieved, and by September 2011, cash reserves of railways had completely vanished. All this shows that railway’s health is already very poor.
Presenting Railway Budget, the then Railway Minister Dinesh Trivedi very honestly conceded that Indian Railway is passing through a very difficult phase. Background of the crisis of railways is that in the last 10 years, there has not been any major hike in the passenger fares and goods freight. During this period, operating cost of railways has increased manifold. Five years ago operating cost of railways was only Rs. 41033 crore, which rose to Rs. 75,650 crore in 2011-12 (Revised Estimates). During this period, outgo on pension alone has increased from Rs. 8000 crore to Rs. 16000 crore.
It is worth noting that in the last one-decade cost of living has increased by about 100 percent. However, Railway Ministers one after another, had shown utmost stubbornness by not increasing the fares and freights and have been patting their back for the same. An indicator of Railways’ health is its ‘Operating Ratio’. By Operating Ratio we mean how much money railway needs to spend to earn rupees 100. This ratio in 2008-09 was 90.5 and 94.7 in 2009-10, which had risen to nearly 125 in the first half of 2010-11. Though it has again fallen to 95 in 2012, it is still less than the target of 91.5. Rising operating ratio is a cause of major concern. The major reason for increase in Operating Ratio is constantly increasing costs, namely fuel, salaries (especially due to implementation of 6th Pay Commission) and other costs on the one hand and stagnant fare and freights on the other. Plans for modernization of railway stations of Delhi division could not make head way due to paucity of funds. There is an urgent need to modernise more than 7000 railway stations in the country. Even the plans to modernise railway stations of Delhi division, requiring Rs. 240 crore could not be implemented due to shortage of funds. Under these circumstances there is big question mark about the role of railways in achieving 9 per cent growth of the economy. Though operating ratio of railways could improve to 95, thanks to increase in freights in the last one year. But there is an urgent need to improve it further. Railway Minister is his budget resolved to reduce this operating ratio to 84.5 by the end of the year 2012-13 and further to 74 by the end of 12th Five Year Plan. This implies that at present railway’s has to spend Rs. 95 to earn Rs. 100, which is destined to be reduced to 74, had Railway Minister was allowed to implement his plan to increase fares and freights.
Financial crunch in railways has nearly stalled development and modernization plans of railways. It is unfortunate that whereas at the time of independence, length of railway line was 54000 kilometres. It could increase to only 64,000 kilometres till date. During this period, total length of roads has increased from 4 lakh kilometres to 44 lakh kilometres (that is, an increase by 11 times). Indian Railway provides travel facility to 230 lakh passengers daily. Apart from this 2650 lakh tonnes of goods are carried by Indian Railway annually. Any short fall in development of railways could adversely affect transport development in the country. The Government should realise that healthy development of railways is key to the development of the country and provision of affordable transportation for goods and passengers. It has a promise to reduce the transport cost significantly. Railway goods freight is approximately one third of road freight. For long distance journeys, there is no alternative to railways. Even for short distance journeys, railway fares are nearly half of bus fares. Development of railways can go a long way to reduce transport costs in the country.
There is no substitute to railways in providing cheap transport facilities. According to the Minister railway needs Rs 5.6 lakh crore for its modernization. During 12th Five Year Plan, Rs. 7.35 lakh crore are to be invested for railway development. Rail Budget expects Rs. 2.5 lakh crore of budgetary support during 12th Five Year Plan. We must understand that the Central Government is already under severe strain to keep expenditure under check. Railway cannot depend upon general budget for its development and therefore it has to raise its own resources.
Although the Railway in India is the cheapest mode of transport than any other mode, Indian Railways has never incurred massive losses. In the past more than a decade, it turned out to be a profitable venture, even contributing to the exchequer significantly. But in the past few months, news were coming that railway finances were in doldrums and that railway was heading towards bankruptcy as deficit in railway was getting unmanageable. Railways had cash reserves of rupees Rs 19,000 crore in 2007-08, major portion of which got depleted and railways was left with only Rs 5,000 crore in May 2010. The situation worsened after that and cash reserves vanished completely. All this shows that railway’s health is already very poor.
Populist orientation of the Government(s) has been hampering the growth of railway and improvement in the facilities for the users. Despite increase in cost of operations, fares have not been allowed to increase. Though, the Government is being rightly criticized, to some extent, for not waiting till Railway Budget 2013-14, and thus bypassing the parliament. However, there is no denial to the fact that the Government has to give up populist approach and rationalize the fare and freight structure of the railway.
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