Thursday, January 19, 2012


Column : Fast train to oblivion


 Thursday, Jan 19, 2012
Operating ratio, the ready reckoner of financial health of an organisation, of Indian Railways was just over 95% last year, inching closer to 100%, and may overtake this by the time Dinesh Trivedi takes the floor of the house to present his annual Rail Budget for 2012-13. For the first time in its over 157-year history, the 1.4-million strong behemoth headed by him would be in the unenviable situation of having to spend more than it earned. Some would call it bankruptcy but, with the government ever ready to pick up the tab, it is only a passing phase. Or is it?

Indian Railways earns only 30 paise for carrying a passenger for a km, while it gets nearly 100 paise for carrying one tonne of freight for each km. Hence, a 24-coach passenger train carrying around 1,500 passengers will earn R450 while a 4,500 tonne 54 BOXN wagon train carrying freight will earn R4,500 per km—a ten-fold increase, which, in a nutshell, is the comparative economics of passenger and freight business.
Hiking the passenger tariff to keep up with inflation had been a routine exercise over the decades, which, sadly, successive rail ministers over the last 8 years have studiously avoided. This populist measure, against all sane advice tendered by Railway Board mandarins, has proved to be highly detrimental to Railways’ financial health and is now seriously hampering its growth. It has already cost the Railways about R65,000 crore in losses over the last 5 years and it is expected to incur a further loss of R20,000 crore for 2010-11.
To add to the mounting losses, rail ministers have been extremely liberal with announcing new trains, and extended the runs of existing ones—almost 200 every year—which, over the last decade, has added a whopping 2,000 new trains, taking the total to 11,000 passenger trains at last count. Striving to leave their unique imprint of management input, Nitish Kumar began with the introduction of his own brand of Rajdhanis called Sampark Kranti. Not to be outdone, Lalu Prasad came up with a string of Garib Raths, all air-conditioned chair cars, and the latest in the series has been Mamata’s Duronto, a non-stop variety of long distance trains. All have successively managed to crowd out the freight trains, reducing their average speed to less than 150 km a day!
Called the nation’s economic lifeline, transporting millions of people and freight in a fast, safe and economic way, Indian Railways is basically a transport utility whose unit for business is a ‘train load’. In 2008-09, Railways’ total expenditure was about R64,839 crore, during which around 11,000 passenger and 6,000 freight, a total of 17,000 trains, originated every day, costing just over R3.8 crore to run each... train. Interestingly, during the same period, the Railways earned R53,434 crore from freight and R21,931 crore from the passenger business, or R8.9 crore from a freight train and just R1.9 crore from each passenger carrying train.
For the rail infrastructure (track and operating system etc), it is immaterial whether the train being run on it is a fast passenger carrying train or a goods train, as they both occupy valuable line capacity, affecting the throughput. Hence, it makes ample business sense to run more freight trains than passenger trains, a simple formula that the US railroads have been following for decades since they have never had access to Federal handouts!
According to Amit Mitra’s “Indian Railways’ Vision 2020 & White Paper”, tabled by Mamata Banerjee on the floor of the Lok Sabha last year, of a total of 286 projects in the pipeline costing about R80,000 crore, only 126 doubling works... are essential, and the 109 new lines as well as 51 gauge conversion works can wait till a thorough review is carried out.
Moreover in spite of JICA (Japanese International Cooperation Agency) funding, a special grant for the dedicated freight corridor would be required for 2011-12 and beyond. The Indian Railway Finance Corporation is frantically trying to generate over R20,000 crore as market borrowings, and a similar amount needs to be made available to complete some of the urgently required ongoing projects for enhancing section capacity.
The government is already short of cash for scores of its infrastructure and other developmental projects, and may not be willing to come to the Railways’ rescue beyond a token grant from its exchequer, which may not be able to fill the gap. A hike in passenger fares appears to be inescapable, which, with the state elections being over by the time Dinesh Trivedi gets to deliver his maiden Rail Budget some time in the first week of March, may become a distinct possibility. The fabled “goose that laid golden eggs” may have been killed in an instant, but the slow bleeding indulged in by the political masters for over a decade may soon place the giant infrastructure entity in a terminal decline unless corrective measures are initiated on top priority, and soon.
The author is former member, Railway Board.




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