How Mamata's agenda has ruined Railway's party

Railway Minister Mamata Banerjee, at the very outset of her Budget speech last year, had said she preferred "social responsibility" over "commercial viability" as a criterion for Railways' progress.

Exactly one year since then, it has become amply clear that she has lived up to her conviction.

While a host of pro-public announcements made by her in the last Railway Budget (2010-11) have been implemented, Indian Railways' finances have gone from bad to worse.

The announcements aimed at imparting a 'public face' to the Budget included no hike in passenger fares or freight tariffs, introduction of 54 trains, including the showcase Duronto service and the ladies special Matribhumi, and expansion of Kolkata Metro.

. . .

The fares have not been increased, the first Duronto express train was flagged off in September last year and Kolkata Metro was made an independent zone recently with an announcement to infuse Rs 10,000 crore (Rs 100 billion) for its expansion.

However, the operating ratio of Indian Railways - money spent to earn a sum of Rs 100 - for the current financial year has far exceeded the expected level of 92.3 anticipated by Banerjee in her Budget speech a year ago.

With a month still left for the current financial year to end, the ratio already stands at over 96.

The rail ministry attributes this worsening efficiency to a variety of reasons, including the impact of the Sixth Pay Commission recommendations and reduction in loading of iron ore for export.

. . .

There was a shortfall of 13.86 million tonnes (mt) of freight by December-end, which had an impact of Rs 2,500 crore (Rs 25 billion) on earnings, considering a yield per million tonne value of Rs 180 crore (Rs 1.8 billion).

Passenger earnings have also taken a hit by an additional Rs 1,500 crore (Rs 15 billion) due to factors like escalation in Naxal activities and Gujjar agitation, which the railways consider 'beyond control'.

This, coupled with the over Rs 15,000-crore (Rs 150 billion) additional annual outgo on account of salaries and wages of employees, has hurt the resource availability for capital investment.

The operating ratio increased from 75.9 in 2007-08 to 90 in 2008-09. It increased to 95 in 2009-10 before reaching the current level of 96.

While an increase in fares or freight tariff is unlikely in this year's Budget too, any hike would not have been of much help given the huge size of the Railways' financial losses.

. . .

Even if fares are increased across the board by 10 per cent, the railways will get only around Rs 2,300 crore (Rs 23 billion).

Getting the private sector to build rail infrastructure, included in the ministry's Vision 2020 document, is one such remedy.

To this end, Banerjee had, in the last year's Budget, announced setting up of a special taskforce to clear investment proposals within 100 days and formulation of a policy document for the Public-Private Partnership (PPP) projects.

While the task force has been set up, a PPP policy is nowhere to be seen.

. . .

Another major announcement in the last Budget speech was to lay 1,000 km of new lines during the current financial year.

As against this target, around 700 km of new lines are likely to be laid.

This, however, would be a major increase over the 300 km of lines laid last year.

What is worse, while the ministry says it is confident of bringing the ratio down to the anticipated level before the year ends, the target could well be missed by a margin of 0.5 per cent and 1 per cent depending on the extent to which expenditure is brought under control, according to officials.