Follow up railway fare hikes with measures to boost private investment

The surprise hike in passenger fares announced by railway minister Pawan Kumar Bansal, much before the rail budget, is a smart move aimed at improving railway finances. The timing should help counter political pressure for a rollback, which would have inevitably impacted the budget session. For almost a decade successive railway ministers, in their bid to play to the gallery, kept basic rail fares untouched. Meanwhile, railway finances continued to dwindle under surging fuel costs and wage bills, with losses on passenger services escalating to around Rs 25,000 crore. Efforts to compensate this huge loss by raising freight rates hit the cargo business. Transport costs rose, hurting the competitiveness of Indian industry.

Losses on passenger services have curtailed Indian Railways’ own fund mobilisation efforts. This not only led to downsized plan spending from the targeted Rs 61,000 crore to Rs 51,000 crore in the current year, it also curtailed replacement of worn-out equipment, opera-tion and maintenance activities and efforts to upgrade safety and passenger amenities. Opposition parties now crying hoarse about the fare hikes would do well to remember that further delay would have severely compromised passenger safety. They should keep in mind that railway trade unions themselves had demanded a fare hike last year.

Efforts at railway modernisation have been a major casualty of populist policies till now. While neighbouring countries like China have rolled out superfast trains travelling at a speed of more than 300 km per hour, Indian trains still run at a maximum speed of 130 km per hour. Its funds crunch has also forced the state-owned enterprise to continue operations with archaic signalling and safety equipment, worn-out coaches and poor passenger facilities. Another consequence has been stalled hiring of a large number of safety personnel, besides curbs on spending on ongoing projects of around Rs 1.5 lakh crore.

Sustaining the current drive to improve the functioning of the country’s transport lifeline would require Bansal to follow up fare hikes with supplementary measures. An important step would be to work to attract private sector investment in the railways by fast-tracking PPP projects. This must go along with steps to urgently boost services by increasing capacity as well as improving safety and cleanliness of the rail network. A tariff regulator to rationalise fare and freight rates is also urgently warranted to insulate decision-making from unnecessary politicisation.

The URI to TrackBack this entry is:

RSS feed for comments on this post.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: