Kharge striked a balance between popular demands and Railways’ financial viability

A rise in freight earnings was celebrated as management wizardry when in reality, it was an emergency one-time measure that boosted earnings over a limited period

New Delhi: After presenting his maiden budget, railway minister Mallikarjun Kharge defended his decision of not reducing passenger fares and announcing big ticket projects at a time his party is set to face a tough political battle in the coming Lok Sabha polls.

Kharge, who tried to strike a balance between popular demands and restoring the railways’ financial viability, said he was not competing with anybody for popularity but wanted to be “realistic” to make the national transporter survive.

“I am really interested in the growth of railways and it should give facility to passengers and the railways should survive for people,” Kharge said.

Congress veteran from Karnataka termed the budget as “growth oriented” while defending his decision not to go for big announcements in the interim budget.

“We have tried to do whatever was possible in the interim budget. We have not increased passenger fares or freight rates. Whatever resources could be mobilized in the existing system, we have tried to utilize that,” he said.

Kharge justified his decision to introduce premier trains on 17 routes where passengers would have to pay more depending on demand.

He said, “Some earnings are required as without earnings we cannot give facilities to passengers. The earning from such 17 trains will help in running other 56 trains for common people.”

The minister argued forcibly in favour of the decision to set up Rail Tariff Authority (RTA).

“The authority will consult all stakeholders such as passengers, transporters and industrialists in deciding the passenger fare and freight tariff,” he said, adding the regulator would recommend whatever is economically feasible and should not burden the people.

“The decision to revise passenger fare has gone in hand of third party. If third party suggests some thing, then it will be easier to implement. So no one can say it was an irrational decision,” he said.

The Congress leader slammed opposition BJP for criticizing the budget as “useless”. “If this is useless, how could we spend around Rs 32,000 crore in ensuring rail connectivity in north-east.”

Kharge said though it was an interim budget, certain measures were announced which could have been given in normal conditions. “I want to be realistic and railways should sustain, it should give service to all the people. That is our motive,” he said.

A decade on the Railway system under UPA

When the Railway Minister presented the ‘Vote-on-Account’ in Parliament on February 12, for the first time in more than three decades, Indian Railways (IR) would have completed almost 10 years under one political dispensation, albeit a coalition. How far has this decade of relative political stability impacted positively (and negatively) on the performance of the Railways? Further, at a time when most of the major political parties must be honing their election manifestos ahead of the election in April/May 2014, are there any lessons for the new government that will be in power after the general election this year?

IR’s performance has become closely linked to the personality of its political head, namely the Minister of Railways. Continuity at that level therefore becomes crucial for any meaningful enunciation of long-term goals and implementation strategies. While the tenure of the first incumbent lasted the full term of UPA-1, thereafter the turnover has been rather rapid for various reasons, progressively reducing from two years to an average of about seven months each for the four ministers that followed. One minister was unceremoniously sacked in the midst of a budget session for daring to raise passenger fares. Another had to step down in ignominy under a cloud of corruption charges; surely not the ideal way a crucial economic ministry and the country’s premier transport organisation should have been handled. Any future government needs to treat the railways portfolio with greater seriousness and certainly not as a sop for managing coalition pressures.

Impressive performance, but…

Despite the relative turbulence at the top, particularly over the last five years, the physical performance of IR has not been inconsiderable. Compared to 2004-05, originating freight loading is set to increase by 74.4 per cent in 2013-14, freight net tonne km by 62 per cent and passenger km by 93.9 per cent. 712 trains were extended and frequencies of 306 trains were increased. All this while the track km increased by 38 per cent and the route km by only 3.1 per cent, indicating a thrust on doubling rather than new lines. The number of accidents dropped sharply by 48 per cent from 234 during 2004-05 to 121 in 2012-13 and 87 up to December 2013.

The performance appears impressive, yet when viewed against Railways’ own Vision 2020, it lags far behind (except in the case of accidents). For example, Vision 2020 had projected an originating freight loading of 2,165 MT by 2019-20, which means an ‘asking rate’ of about 150 MT incremental loading annually from now till 2020 — a virtual impossibility. The case was similar for other performance parameters.

The decade that has gone by has perhaps seen a record number of reports by various Committees and sundry other documents. Starting with the One Man Committee (2004) on the Godhra train fire (Disclosure: this writer was one of the technical experts that assisted that Committee) whose final report (2006) has never seen the light of the day, there was Vision 2020 (2009), a White Paper (2009) to clean up the accounting legerdemain of the previous regime, the Kakodkar Committee Report on rail safety (2012), closely followed by the Sam Pitroda Committee on modernisation of Railways (2012). Going back a few years, there was the Rakesh Mohan Committee Report on organisational restructuring and the report of the Railway Safety Review Committee (Khanna Committee) around the turn of the millennium, apart from a clutch of Status Papers and White Papers. All the wisdom necessary is available in these reports.

Lesson for any new government: Do not appoint any more committees and waste public funds. Also never appoint a committee to score political points.

Nothing exposed the influence of politics’ recent popular lore as the ‘turnaround miracle’ of the organisation, roughly spanning the period 2005-2008. A spurt in the freight earnings by loading wagons beyond their marked carrying capacity was celebrated as a revolutionary breakthrough and management wizardry, instead of seeing it as what it essentially was: an emergency one-time measure that boosted freight earnings over a limited period. Unfortunately the “success” of this initiative also spawned some very imaginative accounting practices that culminated in projecting a cash surplus of almost Rs.90,000 crore at the beginning of 2009. It is another matter that the regime that followed commissioned a White Paper exposing the discrepancies in the accounting procedures.

Further, amidst the euphoria generated, two important factors that helped the ‘turnaround’ were ignored (i) the fact that the extra loading would have been unthinkable had the huge backlog of track renewals not been overtaken by that time, helped to a large extent by the extra funds made available through the Special Railway Safety Fund, a singular initiative of the preceding administration and; (ii) the wholly fortuitous circumstance of a booming economy.

The fickleness of the ‘turnaround’ was quickly exposed once the impact of the Sixth Pay Commission began to be felt accompanied by a downturn in the global economy. An oft-repeated promise made, but never fulfilled (fortunately) by successive Railway ministers, was “to fill all vacancies” within a particular time frame, say one year. It may be relevant to mention that the increase in traffic over the last decade referred to earlier was handled even as the staff on roll reduced from 14.2 lakh in 2004-05 to 13.1 lakh by March 31, 2013, a reduction of more than 1 lakh.

Why is it that despite a fairly impressive performance in physical terms there is a persisting dissatisfaction with the Railways performance amongst the public?

There are several reasons: Poor quality of service in terms of cleanliness, punctuality, promptness, courtesy and disaster management; inadequate capacity on the passenger front, which hopefully will ease somewhat with the commissioning of the Dedicated Freight Corridors; and the eagerness to introduce new train services, which has stretched the Railways’ resources literally to breaking point. While it may be politically inexpedient to put a total embargo on new trains (as recommended by the Kakodkar Committee), it will be a wise policy for the new government to restrict the number to the bare minimum each year with the condition that a new service will be introduced only after a corresponding withdrawal of poorly patronised train services.

Three recent reports that deal with investments are the Vision 2020 (2009), the Kakodkar Committee Report (2012) on rail safety and the Sam Pitroda Committee Report on modernisation. The first two reports envisage an annual Gross Budgetary Support (GBS) from central exchequer of Rs.60,000 crore. With the highest GBS received so far (2013-14) being a little over Rs.27,000 crore (less than 50 per cent of the projected figure), the impracticality of the projections made in these two reports should be obvious.

The Looming Crisis

Finally, a note of warning for the immediate future: gear up for a major financial crisis in the Railways around 2016-17 when the effects of recommendations of the 7th Commission will kick in. While the Dedicated Freight Corridor projects need to be progressed on top priority, it is highly unlikely that the boost in freight revenues therefrom will be available in time to neutralise the effects of the 7th Pay Commission recommendations. So, prepare right now for a bail-out package, as was done through the Special Railway Safety Fund more than a decade ago.