In precarious shape

SUKUMAR MURALIDHARAN

MAMATA BANERJEE'S first Railway Budget is underpinned by the expectation that the economy has now snapped out of the recessionary conditions that prevailed for the last two years. This provides the lone prop to her decision to maintain passenger rates un changed and increase freight rates in moderation.

It would have taken political courage to increase rates by any significant magnitude. But the immediate legacy that Mamata Banerjee inherits being what it is, it may be only fair to observe that it has taken courage even to adopt a policy of restraint. T he situation is, by any reckoning, rather grim. After several years of slippages behind target, the Railways' Plan expenditure in 1999-2000 is expected to fall behind the original budget estimates by Rs.735 crores.

Mamata Banerjee was at pains to emphasise in the course of her speech that she had instituted stringent economy measures that succeeded in holding the Railways' working expenses down very near the original estimates. But the net outcome was still a rathe r sharp setback to the Railways' Plan expenditure.

It may be politically unwise, but the only escape from the conundrum is to increase passenger fares rather substantially. The politically preferred alternative - to put the burden of adjustment on freight rates - has proved economically disastrous, only accentuating the pressure on the Railways' resources over the long term. Apart from heightening the risks of a cascading inflationary effect through the economy, freight rate hikes over the last decade have quite clearly resulted in a migration of traffi c towards other modes of transportation. In recent years, the problems posed by this long-term phenomenon have been compounded by the short-term effects of the economic downturn. It clearly calls for a major effort on the part of the Railways to relieve this pincer-like encroachment on their finances.

Mamata Banerjee has promised precisely such an effort to increase the Railways' share in aggregate freight movements to 50 per cent within 10 years, from the current level of 40 per cent. The campaign comprises several components, some of them involving fresh outlays by the Railways, but all of them seemingly necessitating a policy of moderation on freight rates. There is yet no assurance that the Railways will have the latitude so essential to make this adjustment in its operational philosophy.

Mamata Banerjee's singular innovation in the budget has been to open up a new range of revenue options under the head of "sundry other earnings". Receipts in this category are expected to increase from Rs.635 crores under revised estimates for 1999-2000 to Rs.1,417 crores in 2000-01. In conformity with the recommendations of a Task Force for additional revenue mobilisation constituted last year, the Railways now propose to open up the commercial utilisation of land and air space and commercial publicity as important resource streams. Coupled with an ambitious proposal to lease the "right of way" along railway tracks for optical fibre cables, these measures are expected to gross the Railways an aggregate of Rs.750 crores in 2000-01.

With this somewhat speculative estimate of revenue receipts, Mamata Banerjee has budgeted for a Plan outlay of Rs.11,000 crores in 2000-01. This represents an increase of 23 per cent over the outlay for the previous year and is in turn premised upon budg etary support from the general exchequer to the tune of Rs.3,540 crores. By the standards of the past decade, the Finance Ministry has been exceptionally generous towards the Railways, increasing the commitments out of its Budget by no less than 40 per c ent.

Market borrowings will contribute another Rs.3,700 crores towards the Plan outlay, again representing a substantial increase of the order of 23 per cent. Projected expenses have been significantly increased for track renewals and signalling and telecommu nications. Another notable allocation is a total of Rs.277 crores for "road safety works", including level crossings and over- and under-bridges. These safety-oriented investments are one respect in which Mamata Banerjee has sought to stamp her own sense of priorities on the Railways budget.

Yet for all the newly found munificence of the Finance Ministry, All the reserve funds that are used as internal sources of finance have virtually dried up. The Depreciation Reserve Fund, for instance, will close the year 1999-2000 at Rs.76.72 crores. Ju st enough is being appropriated to the DRF in 2000-01 to meet planned withdrawals, which means that it will end the year at the same level. This compares with a closing figure of Rs.1,434 crores as recently as 1997-98.

Other sources of internal finance, such as the Capital Fund and the Railways Development Fund, are in an equally depleted state. If an erosion of internal funding is compensated by heightened allocations from the general Budget, the Railways will clearly have no reason to complain. But the state of the general exchequer being what it is, there is little reason to believe that the Railways are any nearer to regaining their ability to maintain a viable level of investments in the near future.