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‘Financial Aspects Take Backseat in Rail Budget’

Former Chairman Railway Board Arunendra Kumar welcomes the Rail Budget presented by Suresh Prabhu with a few reservations

Policy Pulse
Publish Date: Mar 8 2016 2:27PM | Updated Date: Mar 8 2016 2:52PM

‘Financial Aspects Take Backseat in Rail Budget’photo: Hrishikesh bhatt

 Former Chairman Railway Board Arunendra Kumar welcomes the Rail Budget presented by Suresh Prabhu with a few reservations in an interview with Amresh Srivastava. Excerpts:

 
What is your reaction on the new rail Budget, presented by the Union Railways Minister Suresh Prabhu.
 
See, this Budget is of passengers’ facility statement in which he has outlined in great detail as to what he is going to do to make the travel a better experience. And he has not listed well about the financial parameters which one would expect with reference to the financial situation of the India Railways. This he has given in the budget footnote and the annexure. 
 
This is a facilities’ budget for the passengers. No fare hike, It is a bold decision. This is good or bad may be debatable in the current financial scenario; I think the India will love it.
 
No new trains, no new lines announced? Critics have declared it as the comic book Amar Chitrakatha. What kind of Budget is this?
 
It is true that no new trains or lines are mentioned in the Budget like last year. But new trains are introduced every year.The only difference is that they are not announcing in the Budget, but they announce it a few days before the new trains start. I can give you example, last year they ran a train from Silchar to Guwahati, Silchar to Delhi, Some trains from Itanagar to Guwahati or down south trains. It is a strategy which reduces the pressure on the Minister to run the announced trains. He has a full year to announce a new train if it is not inked in the budget. There is a pressure from Members of Parliaments to run new trains from their constituencies. So, this is a strategic move. Around 3600 new coaches are being produced every year. Few of them, go in replacement of the coaches and rest are definitely to be utilised for the New trains.
 
There is no hike in the passengers’ fare which amount some close to 22 percent of the total revenue of the Railways. From where will the money come?
 
I suppose his predicament would be like this, last year the fare was increased by 14.2 percent. Since the oil prices have gone down, the economy has flourished; of course, we did not record much of the growth. So, in the backdrop of this, the justification for the price increase for the tickets, just because of the 7th Pay Revision Committee’s (PRC) liability and low growth in the railways, Suresh Prabhu may not have found good enough to increase the fares.
 
The Focus of the  present Budget envisaged on the capacity building and infrastructure improvements, but this also require a lot of money. How this is going to materialise?
 
The Rail Minister is giving money for the capital investments. He got loans. He has increased the planned allocation to Rs 1.20 lakh crores. So, he is giving money for all these sectors. Only thing is that some projects like PPP or institutional financing, they have to be careful in financial mechanism to repay the debts, especially when the railway is reeling under financial strains. They have to repay dividend, repay the principal and interest to the IFRC and other borrowings taken by the railways earlier. Somehow the borrowing and repayment have to be well matched. We have a sign of the debt traps. The railway has money this time for the investment in the infrastructure but they must see that the money goes in the right direction and the right purpose. It should not go in the populist schemes.
 
The Rail Minister Suresh Prabhu has contemplated in the budget the speed of the trains will be increased. How this will be possible when the major routes are choked? 
 
Increasing speed of both passenger and goods trains is indeed a difficult job at present. The average speed of a goods train is 20 kilometre per hour (KMPH) and some time it goes down to 2 KMPH. So, his idea would be that when the dedicated freight corridor (DFC) comes up, the speed of the goods trains will be up and that could increase the average speed of the country’s freight cars. The present network will be available for the passenger trains. But in the present scenario, speeding up the speed of the train seems quite difficult.
 
Now the most important question is how the Operating Ratio (OR) will be reduced from 92 percent to 88 percent or close to it. This seems mirage for the railways for many years. Is this possible in the present situation especially when there is a huge liability brought by the Seventh Pay Panel?
 
The Rail Ministry announced 88 percent last year and later they said that they will be clocking 90 percent and this year 92 percent. But in the prevailing condition, the basic question is whatever the projected revenue, will it be realised or not? If the projected revenue is not realised then the OR will not be down and situation will be worst. Hence, it is more import to relook on the system of operations. Yes, the pay commission will take a lot of money. So, there is going to be serious challenges in operations next year.
 
This Budget says about the target of seven kilometre broad-gauge conversion a day for the year 2016-17. How will this be possible when the Ministry is reeling under financial strains?
 
It is not very difficult for the railway to achieve this target. Well the system has to go further up with the assured funding. If the assured funding is there this is easier to achieve. The 7 KM a day is a summation of Rail Vikas Nigam Limited (RVNL), IRCON, private ports, railways, you combine everything and then it counts for the 7 KM per day when you have assured funding in hand. The only thing is that those 7 KM earns revenue. It should not be a line which does not have traffic.
 
The Railway is taking huge loans from Life Insurance Company (LIC) to the tune of 1.5 lakh crore for its major expansion projects. This much of debt can create problems in future.
 
The LIC loan is an expensive loan. The Indian Railway Finance Corporation (IRFC) loan is comparatively not that expensive. But you need money and you have to take credit when you cannot generate the money yourself. LIC loans can put the railway under strain. If you have to grow, you have to invest. There is no way out.
 
How the partnership with states will help the railway to build the infrastructure? Are the states ready to share the financial burden?
 
The partnership with the states is not new. We have been partnering with States in the past too. Jharkhand, Madhya Pradesh, Chhattisgarh and Rajasthan have offered partnerships. The best is that they offer land to the railway free of cost and they have been also sharing up to 33 percent of the project cost too in their respective states. Therefore, this type of partnership is being extended to other states also. To involve State means that there is some kind of commitment we get.  The many projects of the central scheme cannot be completed without the State’s support and without this support the project gets delayed.  It is good that states are coming forward.
 
Some Public Sectors are said to be willing to share the financial burden of the railways. During your tenure as Chairman, Railway Board, the Coal India, reportedly offered you to give wagons for their load. Do you think that this kind of the assistance will help the Railways which have been struggling for finances? 
 
No, we never asked Coal India to buy wagons. It is true that they offered during my tenure. They have surplus money. They wanted to give loans also but we told them the interest will not come tomorrow. The coal India wanted to treat us as bank for which we did not agree. But surplus money at infrastructure condition of loan is welcome from any one. The Coal India is getting extra wagon when they call for the extra load. Even we can also buy wagons.
 
A lot of promises for better passenger services are assured in the present Budget. Do you think these promises can be achieved? Does this require funds?
 
Not exactly. The passengers will pay for better facilities like good foods, reservations for senior citizens or for female. 
 
The Wi-Fi will not incur in railways’ account as it will be taken care of by the Google. Better catering will not need money. It needs to be organised with right kind of the people with the commitment to serve the passenger better. Cleanliness in the train does not require money. The only thing has to be done is getting things streamlined. It needs vision, direction and the leadership. The agreement to facilitate better service is required from the service providers and most of the things assured in the Budget can be achieved. Yes, increasing speed needs money.
 
There will be no waiting list from 2020. Better coaches, better passenger facilities are promised in the Budget proposal. How these will be done?
 
We have to see the roadmap which the Rail Minister has unveiled. To have no waiting list is a very tall claim and perhaps they have to run more trains to augment the capacity. In some section the waiting list may go down substantially if the Railways have to set aside the timetable of goods trains, no reservation on calls etc. This concept looks alien today but may be reality in days to come.
 
Once again the elimination of Unmanned Level Crossing (UMLC) is being talked about in the Budget but nothing substantial has been done so far.
 
No, there is substantial reduction in the UMLC. The reduction was double in the last year when compared to previous year. This year they have removed 840 unmanned level crossings. The five-year target was set two or three years back and this will spill over in a year or two because it helps both Railways and the State Governments. People die less and accidents are also averted. We have maximum number of causalities on the UMLCs. The Manned level crossings are also reducing because of the road over bridge (ROB).  The city level crossings are normally on the both side of the platforms. The cities are now getting developed and stations areas are getting congested. If that be so then you have to have ROBs. ROBs are normally built far from the station area. Therefore, both manned level crossing and ROBs are common nowadays.
 
How are you going to sum up the current Rail budget?
 
This Budget has come under difficult circumstances. Last time when the 6th PRC came, we have money to pay. This time the railways’ coffer is empty to pay the liability of the 7th PRC. It looks like, though they are saying that they have saved some money close to Rs 8000 crore. Last year they planned and worked out and that saving happened. But this year, the bottom line is that the railway is reeling under financial strains. It is really going to be tough situation for them, especially with our economy, if it does not pick up, all good things, we are talking, will not mature.