Bad practice

The steep hike of 20-25 per cent in railway freight rates, announced a week before the introduction of the railway budget, makes a mockery of the budget exercise.

While the decision itself is bad, it should have been part of the budget proposals if the ministry wanted to effect it. The government  can raise the passenger or freight tariff at any time of the year, but announcing an important decision a few days before the budget amounts to disregard for Parliament. Railway minister Dinesh Trivedi has also indicated that there would not be any hike in passenger fares. If major decisions have already been taken and announced, the budget presentation becomes meaningless. This strengthens the case for doing away with the practice of presenting a separate budget for the railways.  There is no rationale for it, except political reasons and traditional practice.

The decision is also wrong for its intent and consequences. The railways have been losing its share of freight traffic to roads because of mismanagement and inefficiency. An increase in freight rates will cause more freight to be diverted and the expected increase in revenues may not materialise. The railways offer the most economical, convenient and ideal means of  long haulage of goods. But increasing its cost becomes counter-productive and would stoke inflation.  Passenger fares have not been increased for many years even as the railways’ financial condition has been steadily deteriorating. India has perhaps the lowest passenger tariff to freight tariff ratio in the world. There has been widespread recognition, including from parliamentary committees,  of the need to make timely changes in passenger fares, which are heavily subsidised. The railways are a means of mass transport, widely used by common people, but it does not make sense to be completely blind to the commercial aspect of running it.  Incremental rate hikes cannot hurt the passengers.

The railways needs lakhs of crores of rupees  in the coming years to modernize itself, improve operational and safety standards and to support the growing needs of economic development and passenger welfare.  It is suicidal to turn it into a populist platform to promote the interests of  parties to which railway ministers belong.  The present railway ministry is remote-controlled and its decisions and policies are bound to make the railways increasingly sick.