Railways have no money for a populist budget

The Union railway minister Mamata Banerjee may find it difficult to announce populist passenger measures or any elaborate plans for an infrastructure push in the upcoming railway budget.

The Railway’s financial heath has registered a steep decline — with its reserves falling from Rs19,000 crore in 2007-08 to about Rs5,000 crore in May last year — and the ministry is likely to miss this year’s revenue target of Rs94,764.95 crore.

Experts feel that instead of announcing imaginative passenger schemes, its priority should be to address the dwindling finances. “Mamata Banerjee’s third budget calls for some hard choices at a time when the Indian railways bust to boom story is headed towards boom to bust.

"On one end it calls for positive actionable measures, at the other there is an immediate need to initiate measures to restore the organisation’s credibility and financial health,” said Akhileswar Sahay, president (transportation), Feedback Ventures. Adding that the railway minister should come out with a strategy to expedite the execution of projects announced in the last several years and refrain from announcing any new projects.

Tasks such as the construction of new lines connecting 1,000 km, electrification spanning 2,000 km, bidding out of 12 world-class stations, and gauge conversion of 2,500 km by 2012, has not yet been taken up.

With the cash-strapped transport behemoth groping in the dark for funding, Planning Commission as well as the finance ministry has sent feelers that the passenger fares, which has been untouched for over a decade now,  needs to be rationalised.

But will Mamata take the risk, given the political ramifications involved and the West Bengal elections on the anvil? A railway ministry official’s explanation has a glimpse of what may come in the Budget.

“The Railways earned Rs1,300 crore from passenger operations till December 2010. Even if we hike fares by 10%, what will we get?” said an official. “It is time to overhaul passenger fares and take them out of the annual populist act of non-revision of fares, which has depleted the Railways beyond redemption and the system is reeling under ever increasing wage, pension and energy costs,” said Sahay.

With operating costs soaring, majorly fuelled by the sixth pay commission impact, the operating ratio is showing dangerous signs. Operating ratio, a key indicator of its financial health, is currently seen inching close to 100%.

In 2009-10, the Railways logged a ratio of 94.7% and targeted to end the current fiscal at 92.3%. In 2007-08, it was 74.9% and rose to 88.3% in 2008-09. In 2007-08, railways had a surplus of Rs18,927 crore and subsequently dropped to Rs11,506 crore and stands at Rs5,508 crore in May 2010.

Much of the impact is owing to the Rs55,000 crore out go on the arrears of sixth pay commission and pension.

How does Mamata plan to tackle all this then? Will she demand for special funds from the finance ministry?

Mamata Banerjee is likely to announce a dedicated infrastructure fund, worth around Rs30,000 crore, in the upcoming railway budget for the north east.

Special railway safety fund worth Rs17,000 crore is also in the pipeline. The ministry has also pitched for gross budgetary support worth Rs39,000 crore.