Train of neglect

Print edition : March 02, 2018

At the Perambur railway station in Chennai. Photo: V. GANESAN

Railway Minister Piyush Goyal (right), with the Minister of State for Railways, Manoj Sinha, addressing a post-Budget press conference in New Delhi on February 1. Photo: Ramesh Sharma

Jaitley’s Budget offers little to railway passengers or businesses and is marked by a singular failure to address the deep faults in the system that have a critical bearing on safety.

HAVING deprived the Railway Minister of the task of formulating a budget for the Indian Railways, Finance Minister Arun Jaitley has failed to put his money where his mouth is. The allocations for this critical infrastructure are not just meagre but irresponsible given the spate of rail accidents in recent months. Jaitley made much of the fact that he has allocated Rs.1.46 lakh crore for investment in the Railways; but as is the case with the rest of his Budget, this is too little given the scale of the government’s plan for India’s largest public undertaking.

Soon after the Narendra Modi government assumed office, it unveiled an investment plan aimed at modernising the rail system. It proposed investments to the tune of Rs.8.56 lakh crore over a five-year period, implying an average annual investment of Rs.1.71 lakh crore. In the first four years of this plan, starting in 2015-16, the proposed cumulative outlay has been Rs.4.98 lakh crore, implying a shortfall of Rs.1.86 lakh crore. Even more outrageously, the actual outlays in each of the first three years was lower than what was initially “allocated” in the respective budgets. The reality was that in the first three years, actual allocations were short of initial plan allocations by a whopping one-third.

There are two kinds of problems plaguing Jaitley’s approach. The first is the mix of resources that the government planned—hoped would be a better word—to mobilise in order to fund the plan. For instance, resources from public-private partnerships (PPPs), which were expected to account for 15 per cent of the investments, have failed miserably to meet expectations in each year.

But even more importantly, and for which Jaitley is directly responsible, especially after hijacking the Railway Budget from the Railway Minister, inadequate budgetary support has sunk this investment programme. The original investment plan envisaged budgetary support to the extent of 30 per cent, that is, an average of Rs.51,200 crore a year (a total of Rs.2.56 lakh crore over five years). In the first three years the average shortfall in allocation was 20 per cent; in 2017-18, for instance, he budgeted for Rs.55,000 crore but revised it to Rs.40,000 crore, a shortfall of more than 27 per cent. In keeping with his approach in the rest of the Budget, he has projected a budgetary outlay of Rs.53,060 crore.

The other avenues of resource mobilisation have fared just as badly as budgetary support. Institutional finance, which was to provide 29 per cent of the Rs.8.56 lakh crore plan over five years, has also not materialised. For instance, the bond flotation programme of Indian Railway Finance Corporation (IRFC), which issues bonds in order to acquire rolling stock such as engines, coaches and wagons and then leases them to the Railways, has failed to deliver. Bonds issued by the IRFC were to provide, on an average, Rs.20,000 crore annually over four years. But they could raise only a little over Rs.14,000 crore in 2015-16 and 2016-17. In 2017-18, bonds were projected to raise Rs.21,686 crore, but according to the IRFC, there would be a shortfall of about Rs.100 crore. It appears that the large shortfall in budgetary support is being met partly by higher mobilisation through the costlier option of bonds.

The higher target of Rs.28,500 crore set for bond issuance must be seen in the context of the recent volatility in the stock and bond markets, which indicates a greater uncertainty about this source of capital receipts to finance the Railways. Similarly, although Life Insurance Corporation has agreed to provide finance to the tune of Rs.1.5 lakh crore to the Railways, it provided only Rs.9,887 crore in 2015-16 and Rs.11,465 crore in 2016-17.

The other much-touted source of funding, the PPP route, has also failed miserably. These investments, which include the so-called “station development” programme using private investment, have not materialised. Added to this is the greater tendency in recent years to pass on the responsibility of funding to State governments in the name of joint ventures. Station development, which was to yield Rs.1 lakh crore over five years, appears to be failing spectacularly, going by the Railway Minister’s own recent utterances.

In January 2018, Railway Minister Piyush Goyal told the Rajya Sabha that in the last four years, only Habibganj station in Bhopal, Madhya Pradesh, had been handed over to a private developer (in March 2017), which fetched an investment of Rs.100 crore. Tenders have been floated for only 23 of the 407 “A1” and “A” class stations planned for development. Of these, only one bid each came for the Jammu Tawi and Kozhikode stations.

Goyal said that the tendering process had been postponed in most cases because of “lack of bidders’ interest due to non-substantial groundwork by prospective bidders”. He admitted that “no timelines” could be indicated for the completion of the process. What this severe shortfall, caused entirely by the failure of private investment to materialise, reveals is the utter failure of the so-called privatisation strategy. Passengers continue to suffer and the quality of the infrastructure continues to deteriorate simply because of the government’s utterly misplaced faith in private investment, which brought in only Rs.100 crore compared with the Rs.100,000 crore expected.

Meanwhile, the joint venture route has also not taken off because the priority of projects is determined entirely by the dispensation at the Centre, while the severely constrained States seek to maximise the benefit from such investments.

Jaitley’s grand promises for the Railways, made over seven paragraphs in his Budget speech, need to be evaluated in the context of his track record, especially over the last year. His “commitment” to infrastructure development has been highlighted in the media by references to the 18,000 kilometres of track doubling, development of third and fourth lines in certain routes and 5,000 km of gauge conversion he has proposed for 2018-19. This was trumpeted by the media as a big step forward.

Consider this: Last year, Jaitley said that 1,800 km of track length would be doubled, but he was forced to revise it to 945 km on account of capital expenditure cuts. In the case of gauge conversion, for which the target for the current fiscal is a modest 900 km, only about 574 km is likely to see completion.

Jaitley’s track record suggests that all his projections have to be taken with a sack of salt. Track renewal, a critical issue from a safety standpoint, continues to be neglected under Jaitley. He claimed that 3,600 km of track was being targeted for renewal in the current year and said that the maintenance of track infrastructure was “being given special attention”. What he did not mention was that the prolonged neglect of track renewal had meant that the annual target needed to be at the very least 4,500 km, on top of which must be added the arrears accumulated over the years. In effect, this means at least 5,750 km every year. The spate of derailments is a result of this abject neglect. The number of derailments increased from 48 in 2012-13 to 78 in 2016-17 (“Chasing a chimera”, Frontline, October 13, 2017).

Having taken over as the financial custodian of the Indian Railways, Jaitley has failed on every front. Nothing in the Budget inspires confidence that worn-out tracks will be replaced with any urgency, that the supply of coaches and wagons will be augmented to meet the needs of passengers and freight, and that important safety equipment will be modernised any time soon. The tall talk on this critical infrastructure contrasts sharply with his niggardly and cynical approach.

R. Elangovan is vice president, Dakshin Railway Employees’ Union.

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