Railway Budget in perspective!

By M.Y.Siddiqui

Railways annual budget bifurcated from the general budget since 1924-25 has ensured dedicated sustained growth and expansion of Indian Railways to provide efficient bulk passenger and freight rail services to the nation. Reasons for a separate annual rail budget included railways’ need for focused attention for its expansion and modernization as it is a heavy capital intensive enterprise subject to high depreciation, corrosion and rusting, which without special attention will be overlooked and lose its sheen bereft of public and media scrutiny. It was also reasoned that the railways would always require government support to sustain itself. Private investors will be wary to invest in this heavy capital-intensive entity, as people of India have witnessed that no private investors would invest in railways despite various sops provided by the successive union governments since globalization of Indian economy commenced in 1991. Private investors are solely guided by profits, which is not that easy in railways because of long gestation period between investments and fructification of that in profits. Continued pursuit for private investments since have come a cropper. Only, profitable subsidiaries like IRCTC, IRCON, private investments since have come a cropper. Only, profitable subsidiaries like IRCTC, IRCON, IRFC, CONCOR, have been offloaded partly to the private enterprises in keeping with the professed policy of this regime to privatize profit making public enterprises.

Suresh Prabhu was the last Railway Minister to present railway budget in 2016-17 and Arun Jaitly was the first Finance Minister to present in 2017combined union budget that integrated railways budget with the general budget for the financial year 2017-18. Union budget 2022-23 presented by Finance Minister on February 1, 2022 in Parliament is the sixth combined union budget. During the last five years that the railway budget has been integrated with the general budget, Indian Railways has drifted from its usual norms with little focus on general public with special emphasis on expansion of rail lines in hitherto untouched areas like rural, backward and terrainous ones to provide right engine of growth in such areas for their all round development. In addition, focus used to be on passenger amenities including sops for the poor and disadvantaged segments of people considered as part of railways social responsibility.
During the last five years since 2017, railways focus is on profits over the politics. Other emphasis includes shifting proposals for expansion of rail lines in constituencies of MPs of ruling RSS Pariwar, introduction of new trains, extension of trains to longer destinations, increase in frequency of trains, passenger amenities like new halts, improved catering services, cleanliness, modernization of stations, tariff hikes etc. taken away from the privileges of Parliament and entrusted to the Railway Board from earlier rail budgets. Result has been massive hike in passenger and freight fare, unprecedented hike in platform tickets and withdrawal of subsidy to deserving segments in tickets’ concessions, quietly under the veil of secrecy. All these are happening without public glare and quietly in Rail Bhawan taking away the privileges of Parliament. Under the current regime, railways is viewed as corporate behemoth bereft of its social responsibility that used to balance rail services by cross subsidizing passenger services with profit earnings from freight earnings. As a result, 18, 700 kms of new lines, pending execution for long time, are frozen, not abandoned. They are kept alive in the pink book (work book) with annual allocation of Rs.1000 each. Of this, work on 800 kms lines is underway suiting the interests of the ruling RSS Pariwar. Current regime also abolished Rail Users Consultative Machinery at Divisional, Zonal and Ministry levels. Inputs from such periodic meetings used to benefit rail users as they were considered in the annual rail budget. Integration of rail budget with general budget followed the recommendations of a committee on railway reforms headed by economist Bibek Debroy, a member of NITI Ayog, and successor of Planning Commission.
In the first combined budget in 2017, major areas of passenger safety, capital and development works, cleanliness, finance and accounting reforms were announced. Listing of railway subsidiaries, IRCTC, IRCON and IRFC in bourses were also announced. In budget 2018, the outlay of railways was increased to 1.48 lakh crore from 1.43 crore in 2017 budget. It included capacity creation, track renewal, doubling, redevelopment of 600 stations and gauge conversion. Development of world-class trains with Train 18 and Train 20 with Wi-Fi, CCTVs across trains and stations were also announced. In 2019, allocation was increased to 1.6 lakh crore. Downsizing of Railway Board from eight to five members was also announced. In 2020, focus was on private sector for operating trains and redeveloping stations. It was also announced that more Tejas Express-style would be introduced on major tourism routes with 150 private trains within three years on the network. During 2021, railways was allocated Rs.1,10,055 lakh crore, out of which Rs.1,07,100 lakh crore was for capital expenditure. There was a proposal for taking up 263.7 km long Sonnagar-G0moh section of the eastern Dedicated Freight Corridor (DFC) in the PPP (Public-Private-Partnership) model. New DFC routes, East Coast, East-West, and North-South were also proposed. In the budget 2022-23 announced on February 1, 2022, allocation for railways is Rs.1, 40,367.13 crore that included seven engines (multi-model transportation) growth to boost the Atmanirbhar dream including 400 Vande Bharat trains, all aluminum built high speed light weight coaches, envisioned by the abolished Planning Commission in the 12th Five Year Plan as a pilot project.

A major worrying signs are worsening Operating Ratio of Indian Railways indicating enormous losses being incurred by the railways as it is earning less than it has been spending. In the budget document of 2022-23 financial year, OR is to improve to 96.98 from 96.98 budgeted in the current fiscal year 2021-22. According to some retired Financial Commissioners, this data is fudged to hoodwink the public. OR indicates financial health of railways. In fact, railways expenditure is higher than its revenue. Expense includes administrative, staff, repair, maintenance, operations, fuel, energy costs, etc. and contribution to the pension fund and Depreciation Reserve Fund (DRF). During the last two years, expenses have gone up, revenue increased marginally. OR that used to be in the 90s, climbed to 115 in 2019-20. Government, however, did some jugglery, met the contribution to the pension fund with borrowings and budgetary support from General Exchequer and reduced contribution to DRF drastically and artificially showed OR around 98. In 2020-21, the actual OR climbed higher to 131, meaning thereby that to earn one rupee the railways spent spent 131 paise. This year, problem was the pandemic. In 2021-22 again, according to projected revenue sofar, OR is expected to be around 120. Trend points to continuing deterioration.
It is considered a good move to provide higher allocation in railway infrastructure to drive growth of the national economy. However, negativity of it is that that the interest burden of all the investments that Indian Railways started making since 2015 by borrowings will start impacting adversely in coming years after the initial moratorium ends. With OR already so high, this could put the railways in a further debt trap in the near future. Current debt burden on railways is of over 7 lakh crore. This did not receive focus in the budget for 2022-23. Added to this, worldwide cost of logistics and transportation is 6-8 per cent of the value of goods moved, whereas on Indian Railways it is 14 per cent, which has not been addressed in the budget. However, it is learnt that the railways intend to bring it down to 11 per cent. Yet another problem of the railways is that there is no cost benefit analysis post the completion of development projects like new lines, 100 per cent electrifications, modernization of stations etc. In the low-density traffic, low revenue from freight and passenger earnings is a drain on its financial health.

Merger of rail budget with the general budget is detrimental to the public interests in general as allocation for railways are noticed obscurely in the media without detailed comprehensive analysis and evaluation. People as their democratic rights are deprived of the detailed right information about what the government was doing for them regarding further passenger amenities, expansion of rail network and services in their respective areas, introduction of new trains, etc. It is mischievous that within the forwall of Rail Bhawan quietly, the government increases fair and freight rates, curtails rail services arbitrarily with no media and for that matter public glare. MPs, political leaders, civil society activists, social workers, NGOs, other needy flock to the Ministry for various help from railways as now all such matters are directly dealt with there. Earlier, policy matters were unfolded in and approval of Parliament taken amidst intensive discussions including overnight ones to satisfy MPs. Now, there is scant public and media scrutiny of the railways, which bodes ill for democracy and accountability to the people.

Currently, Indian Railways is jostling with private entry to offer competition and better services, accounting reforms to ensure costs and profitability numbers are transparent, establishing an independent regulator, devolution of decision making, away from a centralized structure in Rail Bhawan. National Monetisation Pipeline also has asset monetization plan for Indian Railways and there are plans for corporatization of Railway Production Units.

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