Mixed bag

Pawan Kumar Bansal’s Railway Budget hopes to make long-term gains through short-term pains. But to meet the Railways’ growth projections, the economy has to revive, too.

The budget has proposed revision of freight tariff linked to the fuel price twice a year.

THE Railway Budget for 2013-14, presented in Parliament by Railway Minister Pawan Kumar Bansal on February 26, is a dexterous exercise in bookkeeping as it attempts to inject an element of fiscal discipline and policy prudence after a protracted spell of abject policy apathy.

The budget has stuck to the practice of not tampering with passenger fares, since only as recently as January 21 had the Railways effected a hefty 20 per cent hike in fares with an expected net incremental earning of Rs.6,600 crore a year.

To his credit, Bansal refrained from announcing a raft of fancy projects that would only attenuate the finances of this arterial mode of public transport for bulk goods and also millions of passengers. In a bid to bolster the financial sinews of the system, the Minister announced the advent of a fuel adjustment component (FAC)-linked charge on freight twice a year starting from April 1.

Explaining the rationale behind this move at a time when the global oil prices continue to hover above the comfort zone of affordability for import-dependent countries such as India, Railway Board Chairman Vinay Mittal told a post-budget press conference in New Delhi that the FAC would only preclude further deterioration in the Railways’ finances. He said the cost of providing freight services to rail users was Rs.46,494 crore. Of this, the diesel component was 10.5 per cent, while 5.64 per cent went into electricity charges. So far this financial year, diesel charges have escalated by 39 per cent and electricity payout has risen by 8 per cent. The move is designed to recover Rs.4,200 crore out of the Rs.5,100-crore fuel bill with the remaining amount to be absorbed by the Railways themselves.However, the 5 per cent increase in freight charges across the board has drawn the ire of opposition parties, with the Left saying it would fuel food price inflation because of its cascading effect. The opposition also assailed the budget for scaling down targets for new lines, gauge conversion and acquisition of railway stock in order to cut down the operating ratio (working expenses as a percentage of traffic earnings). It also questioned the rationale of keeping the freight target high while reducing the target for acquisition of wagons by 2,000, rendering it difficult to achieve the freight target.

Revenue sources The budget has also proposed a modest hike in the supplementary charge for super fast trains and in reservation fees, clerkage charges, cancellation charges and tatkal charges in a move to mop up Rs.881 crore a year, besides proposing to realise Rs.4,500 crore in 2013-14 through a special drive to take up the disposal of scrap lying in stores depots and workshops, along the tracks and at construction sites. In a surprising departure from the past, the budget identified 347 priority projects for providing committed funding in the course of the Twelfth Plan (2012-17).

It also took some small steps to garner Rs.1,200 crore each from the Rail Land Development Authority and the Indian Railway Station Development Corporation in 2013-14 through the commercial exploitation of the lands vested with them. Although this had been doing the rounds for several years, it is for the first time that a serious target has been set in this budget to raise non-tariff business for the system.

Tough task With the Planning Commission having tentatively pegged the Railways’ Twelfth Plan size at Rs.5.19 lakh crore with a gross budgetary support of Rs.1.94 lakh crore, internal resources of Rs.1.05 lakh crore and a market borrowing of Rs.1.20 lakh crore, and with another Rs.1 lakh crore expected to be raised through the public-private partnership (PPP) route, the tasks ahead are stupendous. With 2012-13 and 2013-14 Plan expenditure having been pegged at Rs.1.15 lakh crore, a Plan expenditure of more than Rs.4 lakh crore would be required in the last three years of the Plan period to meet the projected target.

Considering the budgetary constraints the Centre is faced with in complying with competing demands from other stakeholders, it will be a tall order for the Railways to get the Plan backing. Raising internal resources to the tune of Rs.1.05 lakh crore by way of tapping tariff and non-tariff businesses will also not be a facile proposition, particularly because the resistance from rail users will be formidable. An unenviable situation akin to this is also seen if one looks at the performance of PPPs. While the Twelfth Plan talks about Rs.1 lakh crore worth of PPP investment, the provision in this budget is only Rs.6,000 crore. It is time that the Railways did a serious introspection to find out why PPP projects are seemingly successful in other infrastructure domains, particularly in roads, civil aviation and ports, but not in their own field.

In the final analysis, the Railway Budget is a mixed bag as it has proposed short-term pains to get long-term gains. But the moot point is whether the economic slowdown will get reversed in the course of the next fiscal to ensure that their growth projections, both freight and passenger, fructify.