Let Railways run on commercial lines, not as a charity

The idea suggested by the parliament panel of going back to the old ways of subsidizing ‘socially desirable projects’ is one from the previous era.

Shishir Asthana, Moneycontrol Research

A parliamentary panel report on the Indian Railways wants to take the railways back to the stone-age. The panel has asked the government not to consider the national transporter as a commercial undertaking and to find ways to fund ‘socially desirable projects’.

As per the railways, a socially desirable project is one which has a rate of return of less than 12 percent.

Of the 432 projects that were considered 292 of them have a rate of return of less than 12 percent and astonishingly 222 of them have a negative rate of return. Thankfully, the committee said that these projects should be funded through gross budgetary support (GBS) and not through outside credit whereby the Railways have to pay the market rate because the return from these lines would not be substantial enough to reimburse the cost of borrowing. In other words, tax payers should foot the bill.

There seems to be little logic in what the panel has recommended. Railways are already starving for funds and with an operating ratio of nearly 96 percent, it is barely able to keep its head above water. According to the Railways, the total net social service obligation on coaching and freight services was at Rs 34,000 crore in FY16. Adding more unviable projects will hamper future prospects of railways.

There is a case for connecting remote border areas with railways, but all other projects which can have an alternative should be considered.

Railways are already going through its biggest ever expansion plan with a clear cut roadmap of Rs 8.5 lakh crore being planned over the next five years. Most part of the funding required for the huge expenditure is from non-government sources.

Railway electrification, which stands at 42 percent, is expected to be doubled over the next five years. About 16,500 km of railway lines are projected to be doubled or tripled. This compares with 22,000 km that was laid over the last 70 years. Private freight stations are expected to be created along with the dedicated freight corridor.

Which the fund requirement for decongestion is huge, railways is clogged with semi-finished projects that have been announced so that politicians can o please their vote banks.

The railway network is already clogged at various points with 16 percent of the network carrying 60 percent of the traffic. Some regions of the network are operating at 150-160 percent of their capacity. This results in accidents and deaths. Rather than spending money on safety the proposal to invest in ‘socially desirable projects’ is a cruel joke.

Surprisingly, there is no mention of hiking rail fare to meet the requirement of full-filling these projects. Railways, which was known to lose market share on long distance route to the airline, is losing on short and medium distances to buses and alternate transports. What it means is that people prefer to use other transport services irrespective of the price. Politicians should thus stop their drama of crying for even small increases because people are now willing to pay provided timely services are available.For the first time in the recent past the railways is being run like a professional organization. Track line at 8 km per day from earlier levels of 3 km per day is an indication that railway employees are willingly contributing to the growth. World Bank has appreciated, in writing, the way in which railways are functioning. Under such circumstances, the idea suggested by the parliament panel of going back to the old ways of subsidizing ‘socially desirable projects’ is one from the previous era.