By doing away with separate rail budget, half of IR’ problems would be solved

IR Rail Budget scrappingNew Delhi: It would be a game-changer when the minister of railways Suresh Prabhu manages to merge the rail Budget with the Union Budget. The railway ministry has completed its paper work and has asked the finance ministry to provide permission for this shift. Once done, a 92-year-old tradition will come to an end.

For the last two decades at least, much has been talked about the railways’ deteriorating financial condition. The remedy to overcome this was neither easy nor quick. In most cases, such conditions were the railways’ own creation. The minister, the top policy-makers—Railway Board and bosses at zonal and divisional centres—in no case could escape the responsibility of owning the blame.

Perhaps it was Suresh Prabhu who got convinced that unless some bold steps to control, curb and restrain the power balance at the top, especially at the ministerial-level, were taken, no fruitful results would be achieved. He has demonstrated that by not introducing unplanned, unsanctioned and uneconomic projects to the railways. He did not prove to be a juggler by introducing new trains, bringing out artlessly painted coaches or by spending huge sums and running the trains non-stop only to create more burden, congestion and chaos for the railways. He has kept himself away from the image of a minister making populist propaganda and senseless bounty distribution on the day of the Budget submission.

The next step is to scrap the practice of a separate railway Budget and Suresh Prabhu is all set to bring about this change and reform.

The separate rail Budget has outlived its utility. When it was introduced in 1924 on the recommendation of the Acworth Committee, conditions were different. Railways then used to generate most of the GDP and any change in the exchequer accounting process would disturb the railways’ financial system and working. Moreover, to make the railways more Indian-oriented in its approach and manifestation, the central control of the railway Budget was creating a stumbling block in bringing it more down to earth, to stand as an independent body. Slowly, it would nationalise itself to be freed from the capital invested in the shape of a guaranteed and semi-guaranteed system.

There have been many ups and downs for the railways due to internal and external factors. But never did the railways create confusion and chaos and solved its problems more gracefully and on its own. However, since Independence, there has been a drastic change in its approach and functioning. Once it enjoyed the status of being one of Navaratnas of Indian public sector, but soon after it fell from grace, the clamour of de-nationalisation started haunting it. The Rakesh Mohan Committee, while noting the decline, suggested corporatisation of railways.

As if this was not enough, the managerial and financial framework of railways too started deteriorating. The backlog of railways’ ongoing projects reached new heights. Neither the White Paper (2009) nor the Vision (2020) gave any clear remedy for reviving it. Moreover, the Centre and the finance ministry started giving railways a step-motherly treatment. The railways is the only authority at the Centre which has to meet its finance commission expenses on its own and after every decade this cycle of calamity is repeated. One wonders why the postal department and ONGC aren’t brought under this ambit? Moreover, the railways pays the finance ministry a sumptuous amount as dividend. The budgetary support given by the finance ministry to the railways has been sharply cut down and the railways has been asked to stand on its own finances.

The railways’ aversion to change to a complete commercial unit has its own limitations. The social obligation factor compels the railways to go slow in the race of transformation and not to leave the poor helpless in using the only affordable means of transportation available to them. Those who want to change the railways overnight want fares and freight to be increased across-the-board without a consideration for the elasticity and sensitivity of demand for the different kinds of railway services.

There has been something essentially wrong at the top level—the minister-level—and nobody could muster the courage to point it out. Who would bell the cat? In fact, the last two decades have shown a fast deteriorating trend in the finances of the railways only due to the idiosyncrasy of ministers. They were reckless in announcing unplanned projects, diverting huge sums to their native state and disturbing the engineering and financial principles of the railways operation and control. They were more partymen than ministers and accepted railways as their own empire.

They have done everything to increase costs as revenues fell. The Budget estimates were never met and actuals came down much more than expected. Under these circumstances, it was the minister who had to change his mind-set to establish objectively the process of working where service, not authority, would be the guiding factor.

Suresh Prabhu has realised that by doing away with separate railway Budget, half of the railways’ problems would be solved. The minister, in fact, would be a loser but railways will certainly gain. However, in another sense, the minister would become more self-disciplined and not recklessly announce bounties, projects and trains, because in that case he has to take a nod from the finance ministry in advance. Earlier, the railway minister was behaving like a monarch and did what he wanted. “Roll back or resign” was the dictum of the day. The other benefits for the railways are obvious. As a ministry, subservient to the finance ministry, the railways will not have to pay dividend which amounts to about Rs 4,000-5,000 crore annually. Again, the burden of pay commission would totally fall on the finance ministry. Moreover, the budgetary support will not be dwindled annually, as a routine. In actual practice, the finances of the railways, as part of central finances, would not deteriorate, but improve. What else does the railways want?

The author is a retired professor and commentator on the railways


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