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Why the Interim Railway Budget fails to impress

February 13, 2014 09:25 IST

Why the Interim Railway Budget fails to impress

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Business Standard

Though a healthy surplus of Rs 12,728 crore (Rs 127.28 billion) has been projected for the coming year, but this may turn out to be illusory.

A vote-on-account Budget is meant to provide for routine expenditure for a short period until a new government that takes over after elections is in a position to take steps to plan for the future.

In the interim Railway Budget for 2014-15, while passenger and freight rates have not been changed (they now have an in-built mechanism to take care of changing fuel prices), 65 new passenger trains have been announced.

These are mostly loss-making and will add to routine expenditure and deficit.

If a new railway minister, when he presents his regular Budget in a few months, does not pass up the opportunity to introduce his own set of new passenger trains, then this does not augur well for the future financial health of the Railways on which depends its ability to offer safe and efficient service.

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Interim Railway Budget 2014-15: Complete Coverage


Photographs: Reuters

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As the revised estimates for the current financial year (2013-14) show, it has been another lost year despite the intra-year measures to compensate for the rise in fuel costs.

The operating ratio -- which indicates how much of the earnings have been consumed by expenses -- has risen (that is, become adverse) to 90.8 per cent, thus missing by a wide mark the target of 87.8 per cent contained in the Budget estimates, and is poorer than the 90.2 per cent recorded in 2012-13.

Any attempt to aggressively raise freight rates will only lead to a loss of an already declining market share vis-à-vis road haulage.

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Interim Railway Budget 2014-15: Complete Coverage


Photographs: Reuters

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Why the Interim Railway Budget fails to impress

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The villain of the piece, in terms of rising costs, appears to be expenditure on account of pension and dearness allowance.

In such a situation, a key aim should have been to reduce headcount.

But this has actually been raised since last year, thus reversing a positive downward trend set in the 1990s.

Worse, funds for safety and capacity expansion in the coming year are scarce.

The annual Plan outlay for 2014-15 has been pegged at about the same level of Rs 64,000 crore (Rs 640 billion) as the current year’s budget, but in the event Plan spending (revised estimates) fell short by six per cent.

This might happen again.

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Interim Railway Budget 2014-15: Complete Coverage


Photographs: Reuters

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Why the Interim Railway Budget fails to impress

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What has taken away resources, even if marginally, is a rise in dividend payment by one percentage point, which will help the Union finance minister meet his fiscal deficit target -- but not the Railways.

The minister has highlighted the fact that fund balances, which had returned to the black last year at Rs 2,391 crore (Rs 23.91 billion), are likely to end this year at a substantially higher level of Rs 8,018 crore (Rs 80.18 billion).

A healthy surplus of Rs 12,728 crore (Rs 127.28 billion) has been projected for the coming year, but this may turn out to be illusory.

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Interim Railway Budget 2014-15: Complete Coverage


Photographs: Reuters

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Why the Interim Railway Budget fails to impress

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The minister has noted that the Indian Railways has successfully weathered the drain on resources inflicted by the last Pay Commission, but in view of the fact that another has been announced the beast will return to torment the system again.

More worrying is the state of railway safety, which in the long run is clearly linked to the right kind of investment to renew ageing assets.

But funds for such investment are not in sight.

Interim Railway Budget 2014-15: Complete Coverage


Image: People travel on a crowded passenger train in Lucknow.
Photographs: Pawan Kumar/Reuters

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