'More of the same' type Railway Budget expected

In the coming Railway Budget (2013-14), Minister Pawan Bansal is unlikely to spring any major surprise and there is little chance of the first leg of a medium-term road map being laid out for a significant improvement in the finances of the national carrier, according to informed sources.

In a Budget that is likely to be made up of “more of the same”, the upside is there may not be any sharp deterioration in the operating ratio in the revised estimates for 2012-13, compared to the Budget estimates.

The ratio has been helped by the rise in railway fares in January, which will bring in Rs 1,200 crore (Rs 12 billion) till March (partly negated by the rise in diesel prices for bulk consumers).

But the decision taken earlier in the year to cut development expenditure does not bode well for safety and passenger amenities. The latter, in particular, has been steadily deteriorating.

Expenditure under three heads - depreciation reserve fund, capital fund and development fund - has been cut by Rs 4,000 crore (Rs 40 billion), or 20 per cent of the budgetary estimate of Rs 20,600 crore (Rs 206 billion) in the current year.

This is to accommodate an emerging Rs 4,000-crore (Rs 40 billion) shortfall in working surplus compared to Budget estimates.

In the April-January period, total earnings went up by 20.4 per cent, compared to a growth of 27.6 per cent projected in the Budget estimates. In the same period, revenue earning freight carried is up 4.5 per cent, against the target set in the Budget of 5.6 per cent.

There is little scope for any substantial revision of fare and freight rates to bring in significantly more revenue in the coming year (2013-14). Passenger fares have been raised recently and freight rates earlier last year.

All that can happen is a “tinkering” with freight rates, raising a few and lowering a few others to marginally improve overall realisation.

Any real hope of the railways picking themselves up significantly can rest only on the prospects of a decent rise in freight volumes.

If the economy picks up there will be a chance of additional freight offerings but this can become

an issue because it may lead to a wagon and line capacity shortage.

On the expenditure side the minister’s hands are tied even more than on the revenue side. The salary and pension bills are given, as also the need to pay a dividend.

Relief can only come from greater efficiency in operations and a lowering of the headcount. There are little prospects of either.

This is not to say there is no scope. The preliminary findings of a study are startling. The Railways spend every year on repair and maintenance of rolling stock as much as 30 per cent of the cost of acquiring assets whose average life is 30 years.

The scope for improving the productivity of maintenance and repair operations and reducing the use of consumables (this is linked to corruption) for the same is enormous.

As for improving overall operational efficiencies, while experts feel that in the current year the management of movement has been fairly satisfactory, the national carrier remains afflicted by what is called “departmentalism” (inter-departmental rivalry, causing each to work in silos).

Hence, there is some talk that the minister may do something bold, merge some cadres in similar domains - finance and personnel on the one hand and electrical and mechanical on the other.

He can also be innovative while being bold by creating a new passenger class - between first class AC and second class AC - to get a little more revenue. But all this may be wishful thinking.

There is also some hope against hope that with a Congressman holding the fort in Rail Bhavan after a long time, the finance ministry and the Planning Commission may be a bit generous and raise budgetary support to meet the cost of shovel-ready projects which will bring in additional revenue quickly.

There are around 130 sanctioned, on-the-shelf capacity-enhancing works, including new lines, on which work can start as soon as financial allocation takes place. A proposal earlier by the ministry for a special fund to clear this backlog of sanctioned.

Complete coverage: Union Budget 2013-14

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