Rail Budget 2016: Prabhu has been brave but needs to find remedy for Lalu-Mamata hangover

By K Yatish Rajawat

Two things Suresh Prabhu did not dwell upon in his speech and these two are the biggest challenges for the Railways going forward. These were the revenue projections for 2016-17 and revenues achieved in the current year 2015-16. After all, budget is about projections of revenues and expenditure based on the past year’s performance.

Rail Budget 2016: Prabhu has been brave but needs to find remedy for Lalu-Mamata hangover

Union Railway Minister Suresh Prabhu. Image courtesy PIB

The reason he did not dwell on these two things is because this has been a challenging year for railways. The revenue target set for ’15-16 was at Rs 1,80,000 crore, what will be achieved is close to Rs 1,68,000 crore with a more than a month and a quarter to still go. The reason for this drop in achievement is a worry for not only the Railways but its business model. Initial number for the first half of ’15-16 showed a growth of just 2 percent in freight the reason attributed was drop in bulk commodity shipment particularly foodgrains. But commodity shipment also includes iron ore and coal a decline in which shows an overall slowdown in the economy. The growth in freight includes a rise in freight rates so in terms of the volume the growth is even lesser.

Now, the second part of the projection which Suresh Prabhu did not dwell upon is the targeted revenues for 2016-17 pegged at Rs 1,84,000 crore a 10 percent increase over the previous year.

Prabhu is hitting for the covers here and being really brave by setting such a high target. Hoping for a good monsoon and need for replenishment in the overflowing godowns to drive the freight for foodgrains.

Secondly, he is hoping for a major revival in demand for coal and iron ore freight. Thirdly, he is hoping that Railways will be able to change its business model on freight and attract automobile, white goods shipment etc. Or maybe all three. This is being brave against all the odds.

Remember the target for the operating ratio for 2015-16 was 88.5 percent and what has been achieved is closer to 90 percent. This is also due to some budgetary savings of Rs 8,720 crore. However, it is difficult to explain if its accounting play or real savings.

Getting his revenues and expenditure right is the first step towards ensuring sustainability of Railways and this was the goal Prabhu had set when he announced his last budget. This target seems to have been lost in the current speech of the railway minister.

Now that what he did not dwell on is clear, let us look at what he did talk about. He spent an inordinate amount of time for passenger amenities which was clearly a demand from the citizens. This was a major demand from citizens and it shows in a survey here. Addressing the needs of the citizens is a low capex and high impact initiative. Therefore he has announced a list of initiatives here and I won’t dwell on it here it has been captured well by the super active internet team at The Hindu newspaper.

Under Prabhu, railways has become more customer-centric on the passenger side, but more needs to be done on the freight side. There is a lot which has to be done on the freight side and I have written about it here and here. Now some of these ideas have been incorporated by Prabhu in his working in the Railways. But a very simple idea of making freight as simple as booking a passenger ticket will ensure that the backend automatically become more customer centric.

When an individual is allowed to book freight on the IRCTC site and his packet can be collected and delivered door to door you know that Railways has turned around. This is logistics muddle that should be the top most priority for the sustainability of Railways.

Currently, freight is treated as a second citizens in terms of customer service. The freight docks are dirty, the procedure manual and paperwork intensive, the entry and exit for lorries, and vehicles cumbersome. There is no last mile service or connectivity Railways offers or has. India Post, the only organization has the infrastructure and connectivity but lacks in customer service. There is a play here to bring these too organization together and form a joint offering for small sized packets and door to door delivery, branded and marketed aggressively. These are the big ideas that will help bring a culture of customer-centric approach in the freight business in railways.

The last and the most important aspect again as per his last budget is breaking the cycle of lack of investment plaguing the Railways for the last 15 years. Successive railway ministers from Lalu Prasad Yadav to Mamta Bannerjee had one simple formula to spend the capital budget in operational expenditure.

In simple words, the money that was given to them for building the house was used for buying daily groceries. They fooled people, media and even Harvard in believing that they were making the Railways profitable.

Now, Prabhu said in his speech that investment goal of Rs 1,00,011 crores has been met for 2015-16, and he has targeted another Rs 1,00,002 crore for 2016-17. These are ambitious targets and there are no concrete details on how to achieve them. Obviously, some of this capital expenditure will come from the main budget where he is seeking more than Rs 40,000 crore.

This is another area that needs more attention from a structuring point of view to attract low interest loans from Japan, US and even pension funds. The time has come for railways to do its own sovereign like offering for international markets, directly and not through IRFC to raise funds. Hopefully, more will happen here so that the target of investment can be met, if not it will remain a brave announcement.

Being brave in adversity is not easy, but being brave can be fool hardy if you are not planning in adversity. This maybe the time for some hard decisions too and it is time that they are taken to make Railways a better, leaner performance engine.

K Yatish Rajawat, is a policy commentator and strategist based in Delhi, he tweets @yatishrajawat

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Updated Date: Feb 26, 2016 08:08:50 IST

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