Rail budget: Prabhu sticks to business

Suresh Prabhu’s Railway Budget for 2016-17, proposing no hike in either passenger fares or freight charges while announcing a bagful of passenger amenities should not be seen as  ‘populist’ budget which can then be conveniently be linked to assembly elections due next year in key states. With a huge fall in the fuel prices and drop in traffic, there was anyway no case for increase in passenger fares. Just because it is a government-owned monopoly does not mean that fares can be revised in the name of reforms. If at all there was a case for tariff revision, it should have been decreased. But that would have been possible if the Railways’ finances were in good health. Even though it continues to fulfill social obligations like cross subsidisation of the suburban passengers and operating on some unviable routes for the sake of connectivity, it largely depends on the business of freight movement comprising mainly of coal, iron ore, steel etc. Unfortunately, these sectors are facing severe downturn in demand, hitting the bottom line of the Railways as well. That explains shortfall in realisation of the gross traffic revenue by Rs 15,744 crore in 2015-16.

The most convincing part of the Railway Budget is that Prabhu has stuck to his medium term objectives of making available reserved seat on demand by 2020 with significant improvement in passenger amenities, but without making grandiose announcements of dozens of new trains which would have remained on paper and in the headlines for a few days. With fuel prices expected to remain subdued, it should be possible for the Railways to operate without any mid-year revision in tariff which in any case would come under the domain of an independent regulator, sought to be established by Parliament. While the operating ratio has been pegged higher at 92% (ratio of expenses against revenue), it has factored in the additional salary burden on account of Seventh Pay Commission.

As for the passenger services and cleanliness, a great amount of detailing is visible in the budget, taking into account the needs of senior citizens, poor and migrant labourers
who travel mostly in unreserved coaches. Announcements of unreserved express trains along with those for the better-offs are smart business strategies. At the same time, increasing use of e-ticketing and other Internet-based services should help reduce corruption in allocation of scarce seats. A similar customer-friendly approach is promised for the freight customers. On the flip side, Prabhu has not been able to execute the projects as per his ambitious targets though funding has not been an issue with Life Insurance Corporation and other multilateral institutions willing to lend to a business which can only grow, riding on huge passenger traffic and unfulfilled needs of the industry across wider sectors.

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