‘Fiscal discipline will keep us going’

Interview with Vijaya Kanth, Financial Commissioner, Indian Railways.

Published : Mar 06, 2013 00:00 IST

BL 2-3-2012 MUMBAI: (Right) Mrs. Vijaya Kanth, Chairperson-IRFC & Financial Commissioner (Railways) Ministry of Railways and Mr.Rajiv Datt, Managing Director, Indian Railway Finance Corporation Ltd during the listing of  IRFC Tax-Free Bonds at NSE in Mumbai on Friday. Pic by SHASHI ASHIWAL

BL 2-3-2012 MUMBAI: (Right) Mrs. Vijaya Kanth, Chairperson-IRFC & Financial Commissioner (Railways) Ministry of Railways and Mr.Rajiv Datt, Managing Director, Indian Railway Finance Corporation Ltd during the listing of IRFC Tax-Free Bonds at NSE in Mumbai on Friday. Pic by SHASHI ASHIWAL

RAILWAY Budget 2013-14 is focussed on bringing fiscal discipline and fiscal consolidation for the future expansion of the major mode of public transport, particularly after several years of policy neglect in aligning tariff even to recover the costs in the passenger segments. In order to get a grip on the nitty-gritty that constituted the finer points of a frill-free budget for the first time, Frontline spoke to the Financial Commissioner of the Indian Railways, Vijaya Kanth, at the Rail Bhawan on February 26, the day the budget was presented in Parliament by Railway Minister Pawan Kumar Bansal.

Excerpts from the interview:

What are the factors that determined the broad parameters of the Railway Budget this time?

In this budget, we have sought to ensure fiscal consolidation, which has been the mantra right from the beginning of 2012-13. Our finances were in a bit of a bad shape because we had to borrow Rs.3,000 crore last year from the government. We were fully committed to returning that loan and we did it in September-October 2012, with interest.

In the fiscal discipline which we enforced, we also ensured that we did not go in for any supplementary demands [for grants] in the monsoon or in the winter session of Parliament. This is the first time in 25 years that the Railways did not go in for supplementary demands. Although there was an additional expenditure requirement of about Rs.1,700 crore, we decided to regulate our commitments. We did not stop paying bills but regulated entering into fresh commitments and liabilities. The next thing we did was that we regulated Plan expenditure. There was a decline in the earnings, which have not picked up, and as on date there is a shortfall of about 11 million tonnes in our loading. So we decided to take advance action and we cut the Plan expenditure to accord with what is available. That is how the Plan outlay of Rs.60,100 crore has now become Rs.52,000 crore. The cut also included Rs.4,000 crore of rollback of the passenger fare.

The reserve fund balances appear to be appallingly low as on the current fiscal. How has this come about?

You are right. What happened in 2010-11 and 2011-12 was we actually had a deficit in the fund balances. This had happened over a period of time because of the implementation of the Sixth Pay Commission recommendations. We had not generated any resources on our own and naturally the fund balances went into a negative. We began 2012-13 with a negative balance of Rs.385 crore, and I decided to set aside Rs.4,000 crore, which will remain in the fund balance as our closing balance, after the withdrawals from the Development Fund (DF) and the Depreciation Reserve Fund (DRF).

The twice-a-year fuel adjustment component (FAC) formula announced in this budget has caused resentment and is seen as contributing to a cascading effect on the overall price level. What do you say about this?

We are doing the FAC only on freight tariff, to neutralise the impact of the fuel cost, which would amount to Rs.5,100 crore. We shall recover only Rs.4,200 crore out of the FAC and are not passing on the balance Rs.850 crore to the passengers; we have decided to absorb [it ourselves] because it is not fair to adjust this on the passengers. For the freight users, this works out to less than 5 per cent. Other sundry imposts, including clerkage charges and tatkal charges, supplementary charges for super fast trains, and reservation fee will yield Rs.800 crore or thereabouts. Since the diesel price has gone up by 39 per cent, we have little option other than putting in place the FAC, though the pricing will be dynamic, to work both ways when the global oil prices plummet.

How has the Railway Budget addressed the curse of spreading thin resources on a plethora of projects, leaving none to fructify?

That is why the rail budget this time has announced prioritising 347 projects during the course of the Twelfth Plan (2012-17) for which we will be allocating the fund on priority. These projects will help reduce congestion in crucial segments, result in capacity augmentation and give additional revenue, besides contributing to economic growth. Our contribution to the GDP [gross domestic product] is currently 1 per cent and ideally we would like to take it to 2 per cent. At the end of the Twelfth Plan, we want to ensure that the Railways are financially sound. We want to build up a cash balance of Rs.30,000 crore.

What does the budget provide to arrest deteriorating passenger amenities and catering?

This budget has stepped up outlays for passenger amenities by 24 per cent. We intend to set up base kitchens at the railway lines, which will serve clean and hygienic food, and the cooking will be under our supervision, with a monitoring and complaint system in place for customers’ comfort.

Are you hopeful of improving the operating ratio (working expenses as a percentage of traffic earnings) which has been hovering over 90 per cent for far too long?

This fiscal, our operating ratio will be 88.8 per cent against the target of 84.9 per cent, and we hope to bring this further down to 87.8 per cent next fiscal, provided we continue with our fiscal discipline.

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