Railway budget set to ditch populism for fiscal health

For the general public, the railway budget is more about fare revisions, new trains and, of late, announcement about bullet trains, but for the man in charge, railway minister Pawan Bansal, the task is cut out. He has already indicated that helping the troubled national transporter to win its spurs by sprucing up its finances is his priority, not populism.

Not too long ago, almost the same time last year, Indian Railways was on the cusp of change with Trinamool Congress MP Dinesh Trivedi, the then rail minister, making all the right noises to rescue the organisation. Alas, Trivedi’s reformist budget cost him his job, thanks to his adamant party chief Mamata Banerjee, whose budgets earlier were marked for absence of much-needed tariff hikes and sundry doles being given out.

Trivedi projected an operating ratio of 84% for IR, a total revenue of R1.35 lakh, the highest ever plan outlay of R60,100 crore and investments from private sector in key rail infra projects. That was not to be as his successor Mukul Roy, at the bidding of Banerjee, chose the populist path.

No wonder, the railways is still stuck in financial turbulence; even struggling to meet its operating expenses.

Bansal till now has played with a straight bat by increasing the passenger fares by 21% in January. But with increased fuel bill, due to hike in prices of bulk diesel, the extra revenue railways was expecting from fare hike has been set off by the increased fuel bill burden.

IR’s fuel bill has increased to an estimated R23,000 crore a year in 2012-13 from R19,700 crore last year.

IR is all set to miss its revenue target by 10% (R15,000 crore). The total goods earnings for the 10 months is R70,067 crore. Railways in its last budget had set a target of R89,339 crore from freight earnings for the current fiscal, which is far from being met. The total passenger earnings for the first 10 months of this fiscal have been R25,924 crore, whereas the target for the current fiscal is R36,000 crore.

With freight charges already very high (India has higher rail freight charges than China and the US) there’s little scope to increase them further as it would take the inflation northwards. Railways’ average income from hauling one tonne of goods over a

one-km distance is R1.08, whereas by moving a passenger for the same distance it earns 28 paise.

“The only option left is to correct the passenger fares again. With such a step, railways can take its operating ratio to 84% from the present 90%,” a rail board official said.

The rail plan outlay for the current fiscal has been slashed by R8,000 crore as it internal generation target couldn’t be achieved. This has forced it to seek higher budgetary support of R38,000 crore for next fiscal, a demand that is unlikely to be fully met by the finance ministry, considering the fiscal stress.In the current fiscal, railways got R24,000 crore as budgetary support.

“The minister is also looking at the non-traffic revenue to mop up some R5,000 crore from leasing out railway land,” the official added.

At present, the railways gets around 5% of its earnings from non-traffic streams, this could be increased to 8% if initiatives such as lease of land and improving the advertisement potential of the national transporter is put to good use.

“The prices of food in elite trains such as Shatabdi and Rajdhani could be increased. The option of excluding water and food from the ticket price and charge for all meals and beverages supplied is also being explored,” the official added. “Charging extra for lower and upper berths can also bring in more revenue,” an official said.
Total rail revenue (BE): Rs.1,35,693 cr
Total revenue till Jan: Rs.1.01 lakh cr
Operating ratio (BE) 84.9%
Operating ration at present: 90%
Revenue from freight (BE): Rs.89,339 cr
Revenue from freight till Jan: Rs.70,067.36 cr
Passenger earnings (BE): Rs.36,000 cr
Passenger earnings till Jan: Rs.25,924 cr


Published in: on February 24, 2013 at 5:15 pm  Leave a Comment  
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