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Railway Budget: Three simple ways to turn Indian Railways around

Monday, 7 July 2014 - 10:10pm IST | Place: Mumbai

For many the railway budget might not be of much relevance apart from the hike in prices of passenger fares. Going by that measure too, the Rail Budget has lost its charm this year as the government hiked the prices even before the Budget session began. However, in the face of anger of other parties and people, they had to roll back the hikes partially. Especially the government rolled back the hike for city passenger fares, perhaps keeping Mumbai in mind. Mumbai is the city with the highest number of daily passengers and is awaiting the Assembly elections in a few months. So the government might not be in any mood to again pull up the prices when the Budget is announced tomorrow. But there is a lot more that needs to be done for an eroding railway system. When DVS Gowda reads out his Budget to us, we must be listening carefully. Here's why:

1. Investment into building a better infrastructure: The importance of the Indian railways to build better infrastructure can hardly be overemphasised. This includes more trains, better rakes, better stations, increase in railway lines etc. The government follows a BOT model (build-own-transfer) for its railway infrastructure projects. So a private party can invest into an infrastructure, and the government can enter into a revenue sharing mechanism with them though the legal ownership still stays with the government. The problem with this model is manifold: the banks are wary of giving money and projects take very long to complete often with no assurance of a minimum return. The project may take 25 years to be completed and yet the revenue might not be lucrative enough. The government needs to find a solution out of this, and that too quickly. The government needs enough money to invest for that. There is no precedent in any country for privatising rail network. The government has to put money in it, to ensure the integrity of the whole network and the decision making power over any changes in future. But the government, along with putting in its own money in the railways, will need to pave the way for private companies to invest. The investment in railways in intricately linked with performance of any other industry, say of coal mining, where the coal and power companies need access to enough rail rakes and networks to transfer the coal from the mines to the power factories. If the manufacturing sector has to look up in India, it must begin with the railways department. The government must also show a promise to invest in safety of the railways. The high incidents of rail accidents necessitate that the government gets serious of safety issues.

2. Look at Railways also as a service industry: The new government must understand, or rather make its employees understand that it is not just physical capital that needs an overhaul in the railways. The service is a part of the system and the department must work towards improving it. The improvement of the terminals, stations, resting rooms are all a part of this. The railways could also introduce some premium services (eg, in food, resting rooms etc) for which it could earn extra revenue. Over all, the services in Indian railways must improve.

3. Rationalise prices but keep eyes on inflation: It is easy to blame the railways for not increasing the passenger fees. But the hike in prices is as much a political call as it is economic. The inflation numbers refuse to come down below 6 percent. Any hike in freight charges would be passed on to the consumers. The government must devise a way out to rationalise the prices with the costs slowly, without harming its own profitability and therefore, its ability to invest.

Depoliticise railways is a cry that forms a part of every “Railway Budget Expectation” narratives, we are trying to limit ourselves only to what is probable in the near future. While it is not probable that the government will start treating the Indian railways as a commercial enterprise, it is possible that it can stop its complete degradation. The Budget can be a good place to give the nation a plan of action.

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