Trivedi does it with mirrors: high ambition on low budget

Aim for the sky and fall at the treetop. This, in effect, is the net takeout from Railway Minister Dinesh Trivedi’s 2012-13 budget where he decided to “bite the bullet” and raise suburban and long-distance passenger fares by 2-30 paise per km depending on the  class of travel. With a 20-25 percent freight increase already out of the way last week, Trivedi could focus the bulk of his budget speech on vision and mission. In the process he has set his railway administration stretch targets for safety, revenues and cost compression that appear extraordinarily bold – and unrealistic. Among the five goals he has set for himself are to raise the railways safety record, consolidate finances, decongest the clogged system by augmenting capacity, modernise the railways, and improve operational efficiencies dramatically by 10 percent in just the next one year: 2012-13. In terms of numbers, Trivedi wants the railways to invest Rs 7,35,000 crore over 2012-17 (during the 12th plan period that begins this year) when in 2007-12 it managed all of Rs 1,92,000 crore. And where is the money going to come from? [caption id=“attachment_244160” align=“alignleft” width=“380” caption=“Union Railways Minister Dinesh Trivedi. PTI”] [/caption] According to Trivedi, Rs 2,50,000 crore will come from the general budget (Mr Pranab Mukherjee, please note), Rs 30,000 crore from other government support to “national” projects, nearly Rs 2,00,000 crore through the railways’ own resources, another Rs 2,18,000 crore from extra-budgetary resources (a euphemism for borrowings or other sources), and another Rs 20,000 crore from “ploughing back” dividend payable to the government, among other things. Great. So one presumes he should have made a good beginning this year, the first year of the 12th plan? What he has produced is a mouse: Rs 24,000 crore from Pranab Mukherjee (out of the Rs 2,50,000 crore he wants to raise over five years); he has scraped the bottom of the railways’ own barrel and found just Rs 18,050 through internal resources (against the promised Rs 2,00,000 crore over five years), and another Rs 16,050 crore as extra-budgetary resources. Rs 2,000 crore comes from the railway safety fund. In short, in the very first year of the plan, Trivedi has managed to find less than 10 percent of the investments he needs to make over five years. The remaining 90-and-odd percent has to come over four years. Not exactly a spectacular start to best intentions. Well, it ain’t going to happen. Especially in the context of a difficult domestic growth environment and the finance minister’s need to ensure fiscal consolidation. The only way he can achieve his goals are (i) if the economy rebounds spectacularly (unlikely), (ii) he starts privatising railway assets aggressively (forget it), and (iii) opts for more borrowings or public-private partnerships – something that his boss Mamata Banerjee is not too comfortable with. Clearly, while there is no ambition deficit in the railway minister, one wonders where he got his numbers from. A look at the operational numbers tells us why. Even as 2011-12 has been a washout with freight loading targets being lowered by 23 million tonnes to 970 million, Trivedi has upped 2012-13’s targets by 55 million tonnes to 1,025 million tonnes. How this is going to happen when freight rates are up steeply and the economy is slowing down is not clear. Even more spectacular are Trivedi’s efforts to improve the railways’ working efficiencies. If 2011-12 will see a drop in the operating ratio – the ratio of costs to revenues – from the budgeted 91.1 percent to around 95 percent, next year Trivedi thinks he can pull off a miraculous turnaround by as much as 10 percentage points and bring down the operating ratio to 84.9 percent. And this is supposed to happen when costs of everything – from diesel to staff expenses – will be rising. The railway minister announced that another 1,00,000 employees will be added to an already bloated railway workforce of 1.4 million in the Group C and D categories of vacancies. In 2011-12, 80,000 new recruits were taken in by the railways. In the coming year, Trivedi has pencilled in a 27.6 percent rise in gross traffic receipts when the current year is likely to see to see a drop of Rs 2,322 crore compared to budget estimates. Given the gap between projections and likely performance, Trivedi has focused on creating the illusion of action by setting up committees and special purpose vehicles. While two committees, one headed by Anil Kakodkar on safety and another by Sam Pitroda on modernisation, have already made their recommendations, Trivedi has proposed a Rail-Road Grade Separation Corporation to deal with unmanned level crossings which account for a lot of fatalities. Then there is to be an independent Railway Safety Authority to oversee safety, a Railway Research and Development Corporation, an Indian Railway Station Development Corporation, a Logistics Corporation, and new mission mode directors reporting directly to the Railway Board to look at specific aspects of the modernisation of the railways. As we said, when the money is lacking, set up a committee to look at how money can be raised. Perhaps the best thing the railway minister did was raise fares after nearly a decade of no (or very marginal) fare hikes. The 2-30 paise hike in fares per km, will raise suburban fares by Rs 2 for second class passengers travelling 35 km. According to Trivedi, for non-suburban second class ordinary passengers travelling a distance of 135 km, the increase will be Rs 4 only. For second class mail/express passengers travelling a distance of 375 km, the addition to the fare will be Rs 12, and for a 750 km journey by sleeper class on mail/express trains the extra payable will be Rs 40. An AC 3-tier passenger travelling a distance of 530 km will be required to pay an additional Rs 57. The increase for AC 2-tier and AC First Class  passenger travelling over same distance will be Rs 84 and Rs 163 respectively. Even after this fare increase, freight traffic will continue to subsidise passengers. But, to his credit, Trivedi has at least begun to acknowledge this reality. It’s a beginning, at least. For that he deserves kudos.