Wednesday, July 2, 2014



RAIL FARE, RAIL DEVELOPMENT and PPP or FDI

R.Elangovan, Working President, DREU

Indian Railways is running on profit. Its expenditure is less than its earnings. Its operating ratio has been between 87 and 93.

67 % of Railway income is from Goods Traffic. In goods traffic there is always profit. Only 27 % of Railway income is from passenger segment. Out of this 79 % of earnings is from non suburban long distance Mail / Express trains. There is no loss in this. 14.5 % of the passenger segment is from ordinary trains, 6.82 % is from suburban traffic. Only these two segments make loss. Once the World Bank in its recommendation or dictation asked the Railways to close down the “money losing “ordinary second class trains.
 Let us examine certain areas of loss. In 2011-12 as per the year book of Railways, Indian railways had had to fulfill a social obligation of Rs.17651 crores. Apart from this Railway is spending Rs. 2405 crores on Law and Order, which is 50 % of the Law and Order cost met by the state Govts.
Four Types of Social securing obligations have been listed in the yearbook.
One is subsidized rate on essential commodities like Vegetables, Fruits ,fertilizer, Coal, Bamboo, cotton  salt etc amounting to 57 crores.
Two, Suburban passengers constitutes 53 % of total Passengers, but out of the earnings it is only 6.82 %. The passengers holding season ticket in mainly 3 metros, Chennai, Mumbai and Kolkata is 64.6 %. At present monthly season ticket are charged at 15 single fares. For quarterly season tickets 2.7 times of monthly season ticket is charged.. There are Biannual and Annual season tickets also.
The railways point out that this suburban segment is making a loss of Rs. 2853 crores. Non suburban season tickets are also there. They are even up to 150 KMS in most of the area and even beyond 200 KMS in certain areas. These non suburban season ticket holders constitute a 22.6 %. This suburban season ticket charge was doubled by BJP Govt.
There are other losses of earnings to Railways on account of many concessions like senior citizens, Press persons, Defense personnel, Students etc. Milk and seed transport to North East states are also subsidized.
The third area of loss is from uneconomic branch lines. There were 110 uneconomic branch lines. There the operating cost is more than the income. A reforms committee recommended for closure of 40 of them. All the lines could not be closed due to popular protest. Now there are 88 such branch lines. Together they make a loss of Rs.1366 crores.
Forth area is new lines within 15 years of construction. Many new lines do not earn the cost of operation. Therefore they are making loss,
Thus there is a total loss of Rs. 17651 crores which is 16.95 % of the total income and 17.89 % of the total expenditure.
This is not a warning phenomenon.
All over the world the passenger segment is making loss.
Ex. Japan has 5 private passenger companies. They did not increase the passenger fare for the past 20 years. The difference between the cost of operation   and the income is paid by Japanese Govt as subsidy to Railways.
In the same manner British Railways having 25 private train operating companies also are making loss. The subsidy is given by the Govt.
There is an argument that fares should be increased and the Railway development shall be met by this .If the freight charges are continuously increased the rail users will shift to roads. Already in many states coal, steel and even POL products have gone to roads. On the other hand railway is making efforts to bring back the traffic from road to rail. On the other we are chasing the traffic to roads. There is a limit beyond which the fare and freight cannot be increased even in the higher classes. The fare increase beyond a limit will chase the passengers to Air. Thus causes reduction in the income of railways defeating the very purpose of increasing fare and freight.
This argument is anti national and anti industrial. If the second class and suburban fares are increased passengers will shift to roads, which are already congested. According to a statistics produced by Central Ministry of transport there were 1.4 lakh deaths in road accidents in the year 2011-12.If the rail users are chased to roads it will cause many more loss of invaluable human lives.
Besides this the passengers will tend to live in cities and towns as the transport cost is more. This will lead in increase in Urban population creating social problems.
The third aspect is that the road consumes 5 times the fuel consumed by railways. This creates 2 problems. One is economical and another is environmental. Because more fuel is spent on roads we are incurring more expenditure on foreign exchange costly fuel with attendant current account deficit problems. Since more fuel is spent on roads it causes serious pollution problems. Therefore increasing the fare is Anti National, Anti people and unwise.
DEVELOPMENT :
Then there is a question as to how to increase the earning of Railways. The only answer is increasing the profit making segments without reducing the social obligatory services. Reduce the percentage of loss by increasing the earnings otherwise.
This can be achieved only by augmenting the capacity of Railways. We need more new lines, doubling, quadrupling, and gauge conversion with electrification to avoid use of foreign exchange costly fuel, new coach, Wagon and engine factories, modernization and strengthening of Railways with more safety environment to meet the growing demands a part from decongesting existing lines.
Mamata Banerjee as Railway Minister brought out Vision 2020 paper according to which in a 10 year period 14 lakh crores has to be spent on Railways for these developmental expenses. This could not be achieved because of two reasons. One is that Govt share of expected expenditure did not take place. The other is non materialization of PPP as expected.
There are many gauge conversion, doubling and new lines ongoing projects costing 1.47 lakh crores un finished dragging for many years. Many engine factories and coach factories like Rae Bareli and Madhepura planned to be constructed to beat the ever increasing demand could not be created due to lack of funds. They were originally planned through PPP which could not take off. They are now constructed as special Railway Projects. They need 1 lakh crore rupees.
The Sam Pitroda Committee which is called modernization committee recommended for an expenditure of 5.69 lakh crores which also was to be partly met by PPP. Nothing has been done to implement this.
Dr.Anil Kakodkar committee which has considered the safety of the railways recommended for an investment of Rs. 1 lakh crore in replacing the Level crossing gates with ROB;s and RUB’s, strengthening of the signal system, introducing LHB coaches etc .Nothing could be done even after 2 years for want of money.
The Man Mohan Singh’s dream project of Eastern and Western dedicated freight corridors are on snail’s pace in progress as PPP did not take off. Railways need Rs.1 lakh crores for this.
For 12th 5 year plan it has been estimated that there is a need for investment of Rs. 5.19 lakh crores.
BJP Govt has proposed a diamond quadrilateral corridor for express trains. This is not new. Already the Sam Pitroda Committee has recommended for express highways including one of Bombay- Ahammedabad costing Rs. 60000 crores this has been renamed as Diamond Quadrilateral and the investment needed is about 12 lakh crores.
Altogether there is a need for investment of Rs. 15 lakh crores exclusive of investment for Diamond quadrilateral. Is it possible for Railways to make such a huge investment from its own recourses though Railway is running in profit?
Is it possible to meet this huge expenditure by increasing the fares and freight, there by chasing the goods and passengers to roads resulting in reduction of earnings?
There has been an argument that PPP or FDI has to come for rescue. The very bad experience of Railways shows that such huge investment does not come from PPP or FDI. Rae Barieli and Madhepura factories sought global tenders inviting even FDI, 100 %. The experience is nobody has come. Same is the experience with freight corridor.
Mamata Banerjee organized a meeting of the captains of Industries where she declared Railways a to z, will be opened for private. 
As per THE HINDU report’
“Despite her exhortations none from the gathering came forward to invest in Railways “
 In the 10th 5 year plan though it was expected that there will be an investment of 20 % from PPP, conclusively, there was only 0.62 % investment through PPP.
In the 11th 5 year plan there was only an investment of 4 % through PPP despite the target  of 36 %.
It is therefore fallacious to raise the Mantra of PPP, FDI or Privatization for meeting the investment needs of Railway development.
India is a developing country .80 % of its people live expending less than Rs.20 a day. They should be taken in to account when deciding the cost of travel. In Argentina another developing country Govt Railway was privatized. The private later on closed many lines and brought down to 8000 KMS from 35000KMS, 95000 employees came down to 15000.India’s own pre independence experience is also that private has no national interest to develop railways.
In Peoples Republic of China the investment is hugely made by the Govt of China. It is therefore their infrastructure is growing very fast meeting the demands of the people and increasing the earnings of the railways also meeting the social obligations. If Indian Govt wants to increase the earnings of the Railways it should also invest hugely in Railway Infrastructure. There is no point in placing the same Mantra of UPA (ie PPP, etc) deceiving the public.

Since investments commensurate with need do not come the Railways are adopting austerity measures. They don’t spend sufficiently on the safety needs. They adopt a policy of optimum utilization of existing track, rolling stock and man power. It is told to squeeze maximum from the minimum and even go to the extent of saying to “Milk the cow dry”. Since there are no sufficient rolling stock factories to produce Engines, Coaches and Wagons they are putting them to maximum utilization, even relaxing the maintenance schedule, tightening the links of Running Staff and the Engines, Rakes, non filling up of vacancies now amounting to 3 lakhs including 1.5 lakh safety category vacancies. But recruitments are only 20000 to 30000. Even working hours of Loco Pilots, Gatemen and certain station staffs are inhumanly stretching even beyond 12 hours a day. Loco Pilots are asked to work continuously for 6 nights. The track and wagons are put to maximum utilization leading to pre mature deterioration by way of allowing carriage of goods more than the carrying capacity. Level crossing gates where maximum accidents and deaths occur and which are obstructive to the free movement of trains are not replaced by ROB’s and RUB’s. All these lead to problems of punctuality, accidents and deaths of invaluable human lives. There is hue and cry only at the time of accidents and deaths. Real cause is not remedied and investments are not forthcoming. Even cleanliness and catering have been contractorised making quality causality.

In such a case there is an argument, where is the Money? Where there is will, there is money.

In Indian budget there is a part called Revenue foregone statement. According to this statement in the year 2011-12 Indian Govt had to forego earnings of Rs.5.73 lakh crore from corporates. This is called Tax foregone by the Govt. Since 2005 a total amount of Rs.31.94 lakh crores has been foregone by the Govt without collecting it from Corporates. The Govt which wants to tax the people by increasing the fare and freight allow the corporates to amass wealth by not paying the Govt the Tax paid by others. If only the Govt is stiff in collecting it can get the needed funds for the investment.
The question remains whether the Modi Govt do this which depended on corporate for its electoral expenditure and propaganda. .

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