Mired in financial turbulence, will Rail Budget 2013 ditch populism?

Raising revenues and setting its finances in order is the number one priority for railway minister Pawan Kumar Basal, who is all set to present the Rail Budget tomorrow morning.

By increasing passenger fares by 21 percent in January with an aim to garner additional revenue of Rs 6,600 crore, Bansal was hoping to steer the railways out of its financial mess. But thanks to to hike in bulk diesel prices, the extra revenue from the fare hike is likely to be off set by the increased fuel bill burden.

So whether Bansal is willing to ditch populism and raise fares and freight charges once again tomorrow is key to nursing the railways back to health. However, with freight charges already high, there’s little scope to increase them further as it would take the inflation northwards.

According to a report in the Hindu , raising both tariff and non-tariff resources depends upon the Railways meeting its working expenses, reducing operating ratio, its ability to save for development and safety aspects and providing better amenities for its growing number of passengers.

“The Minister needs to raise money, as achieving the budgeted target of revenue from both the freight and passenger segments seems distant during the current financial year. Most of it has to come from extra budgetary resources as generation of internal resources is already under pressure because of the burgeoning fuel bill,” says the report.

Bansal has had several rounds of discussions with Prime Minister Manmohan Singh, Finance Minister P Chidambaram and the Planning Commission in connection with the Rail Budget. He is also understood have discussed the possibility of fare hike with Congress president Sonia Gandhi. However, a section inside the Congress is not inclined towards effecting another round of hikes as general elections are not far away.

Already the current plan outlay has been slashed by around Rs 8,000 crore, which has forced it to seek a higher budgetary support of Rs 38,000 crore against Rs 24,000 crore last year.

However, a research report by Macquarie today pointed out that higher government support is to mainly to clear a huge backlog of pending projects, to increase spending on safety enhancing measures and to budget for higher outgo in terms of fuels expenses.