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A separate railway budget: utility or futility?

 

GOURAV VALLABH/ KHUSHBOO JHA | February 26, 2011 15:26
Tags : current budget Mamata Banerjee | railway budget | india |
 
In the preamble of the current budget Mamata Banerjee quoted “we have attempted to combine a strong economic focus with an equal emphasis on social inclusion”. However, this year’s budget was a mere repetition of the last year’s populist style budget without exhibiting any allegiance to the quote in the preamble in its true spirit.
 
To that extent the ministry has presented the rail budget as a ready reference of new trains, lines, and concessions instead of being a strategy towards its viability, development, sustainability, customer-orientation and technological modernization, which is the need of hour. With an operating ratio (Operating ratio is a measure of the money spent by railways to earn a sum of Rs 100) rising to the level of 95.3 this year against the expected 92.3, there is not much of a hope from the current budget. The pressure on the operating ratio given the current populist rail budget, with no hikes is going to be huge.
 
In the last few years the rail budget has been losing its importance as a separate presentation. The budget has been reduced to the status of an income and expenditure account of the ministry rather than being a vision for future development. For example, the minister said in the House that there is going to be no increase in the freight charges as the ministry raised freight charges in the month of January only, and as such is not a true indicator of pro-industry-growth stance of the budget.
 
While the initiatives towards the east of the country need to be applauded, such magnanimity towards one region while depriving others of this benediction does not augur well for the overall growth of the country. It is a well known fact that the spending on railroad infrastructure and operations has a multiplier effect, and the quantum of this multiplier effect would be greater, if this spending is spread over a greater geographical area.
 
Ambitious growth plans have been announced, with several Duranto, Shatabdi, passenger and other trains being announced. Our basic question here is that can the current over loaded railway infrastructure endure and live up to these announcements. To add to that there is a back log of last budget announcements in terms of tracks completions .Then, why we are announcing the schemes which are not grounded in the realities of execution capacity?
 
The ministry has accounted for in its projections, ordinary working expenses, dividend payments, salary increments, and development and capital funds. However, it has not taken into account the volatile elements like HSD oil, which in the current global-economic scenario is prone to go up disturbing the balance of expenditure and worsening operating ratio.
 
Given the historic precedents, there seems to be insufficient buffer of internal funding with the railways for the ambitious new train roll-out, expansions, modifications and upgrades, envisaged in future. The whole burden of funding these projects, in this case would fall on the finance ministry, defeating the purpose of the separate standalone status to the rail budget.
 
The budget has its streaks of silver lining. Ministry's plan to attract private investment in rail connectivity between mineral-rich areas and industrial belts to support increasing demand for these key raw materials is a welcome initiative. R2CI to incentivize developers will have a long lasting impact by offering to return their investment over 10-25 years through a surcharge on freight.
 
Following the recommendation of the 10-member William Mackworth Committee, 1920-21, that “the railways should have a separate budget of their own and assume responsibilities for earning and expending their own income,” railway finances were separated from the general government finances in 1924. In fact, 87 years later, the railways become a tool to gain political mileage.
 
The ability of the rail budget to capture the spotlight and the highlight makes it prone to predilections and a tool for pandering to populist issues, instead of looking at financial prudence and the growth interests of the country. Rail budgets are increasingly seeing announcements of un-remunerative projects, unviable schemes, cross-subsidies, while other key issues like safety, track strengthening, safety, receive inadequate provisioning
 
Should we then, stand back, and ask, whether we need a separate rail budget at all when we are doing fine, without a separate budgets for others e.g. Road transport budget, even when road infrastructure is expected to grow at 7000 km of new roads every year?
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Issue Dated: Feb 5, 2017