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Rail Budget 2015: Prabhu strikes a fine balance between good politics, economics

In his maiden rail budget as Railway Minister, Suresh Prabhu strongly fulfils the three expectations we have. One, strengthening railway finances by a reduced operating ratio. Two, striking that fine balance between good politics and good economics. And three, a vision that transforms an organisation into a transporter that can support a fast-growing modern economy.

By targeting an operating ratio of 88.5 percent — the lowest in nine years — and 3.3 percentage points lower than previous year’s 91.8 percent, Prabhu has brought the focus of Indian Railways back on a healthy balance sheet. Of course, Prabhu isn’t the first to do so and won’t be the last. In this five-year-long tenure under UPA 1, Lalu Prasad took lead on that count, while attempting to drive a turnaround of the Railways, between 2004 and 2009. The best-ever operating ratio, however, was 74.7 percent in 1963-64, when Swaran Singh Sardar was minister; 52 years later, it remains an aspiration.

 Rail Budget 2015: Prabhu strikes a fine balance between good politics, economics

AFP image

Simply put, the operating ratio is the expenses the Railways incur to get Rs 100 as earnings. While expenses have been rising through decades of financial decadence, railway ministers have had a tough time expanding the numerator -- working expenses including safety and pension funds but excluding suspense expenditure. On that front, by focussing on productivity gains such as improving capacity on existing networks, gauge conversions and increasing average speeds, Prabhu has taken Lalu's ideas forward.

By leaving fares untouched, Prabhu has followed the trodden path of all his predecessors barring Dinesh Trivedi, the relatively saner face of Trinamool Congress, who faced flak from Mamata Banerjee and subsequently lost his job for daring to take one tiny step towards getting consumers to pay for travel in 2012-13. The political economy of India does not allow for increase in fares, and so, Prabhu has delivered good politics.

Where he has added value to this economic constraint is in sharply focussing on passenger services. From safety and travel comforts to ticketing convenience and food chains, Prabhu has been able to articulate policy solutions to consumer woes. He doesn’t look like a minister ministering from Rail Bhawan but travelling in trains, walking the stations, experiencing the pain and the frustrations that 23 million commuters face every day. Not for him the never-ending recital of new routes.

In this budget, Prabhu has embraced technology tightly. From mobile charging facilities in general coaches and Wi-Fi at all A1 and A category stations to online booking of retiring rooms and wheelchairs, Prabhu has brought smiles to the middle class commuters. But it is the poorer sections, travellers on unreserved compartments, for whom he has created a positive disruption with his Operation Five Minutes, under which the passenger would be able to buy a ticket within five minutes. Gone, in a moment, are the endless queues.

But where is the good economics needed to finance this good politics? For this, Prabhu is leaning on entrepreneurs. In offering clean stations to commuters, for instance, he proposes to revamp policy and simplify processes for entrepreneurs -- a trick borrowed from and in tune with Prime Minister Narendra Modi -- through open bids, to be processed by independent experts and uploaded on the web. The new model concession agreement or standardised contractual frameworks, for instance.

Further, Prabhu’s budget holds within its fold a regulatory framework that will not only oversee tariffs but also write regulations, set performance standards and adjudicate on disputes among licensees and the ministry. If operational opportunities in the budget are a teaser, this single act throws the doors to private entrepreneurs wide open. Again, this is not something new -- the idea of this far-reaching reform has been lingering since 2001, when the Rakesh Mohan Committee first recommended it.

His ambitions are big, his focus sharp. What’s missing is how Prabhu will manage the money. Where, for instance, will the Rs 8,50,000 crore investment in the next five years come from? Prabhu is aware of the constraints on the government and yet dares to dream. Some options before him are multilateral development banks, pension and insurance funds. But a number so spectacular needs a deeper look, a greater discussion that we hope will unfold shortly.

A significant economy that is today the world’s fastest-growing has no place for a creaking infrastructure. If the Railways is to catalyse, or merely serve, the needs of this growth as India moves towards becoming a middle-income nation, this infrastructure needs a revamp, partly incremental and partly new. With stronger finances, lenders will feel more confident of parking money here. With an independent regulator, entrepreneurs will feel more assured.

On his part, Prabhu says the Railway Budget 2015 is part of a trilogy of documents -- a White Paper, which places the challenges the Railways is facing before Parliament; the budget; and a Vision 2030 document that would be released later in the year. With Vision 2030, we will see a deepening discussion of the Railways and its role going forward.

To me, Prabhu’s Railway Budget 2015 is also a signal to Union Budget 2015 to be unveiled on February 28. It seems to be in tune with the larger macroeconomic requirements of India, as well as Modi’s plan for the economy. Being part of the same party, the same mindset and harbouring the same objectives, this budget needs to be seen as being part of that larger strategy.

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Updated Date: Feb 27, 2015 07:38:18 IST