Lack of funds, poor planning, fare disparity Nitish Kumar wants to rid the Railways of its ills
FOR the average Indian, train travel is soon going to get costlier. Under pressure from depleting coffers, massive projects backlog, severe competition from roads, declining government funds support and a social obligation of serving all and sundry, including politicians' whims, the gigantic Indian Railways are on a drive to refurbish and regenerate itself.
Leading the campaign for change is the aggressive Union minister for railways, Nitish Kumar (see interview). A former mechanical engineer, Kumar has laid bare to the Central government as also on the floor of Parliament, the harsh truth of the situation in a status paper on the Railways and, for the first time, a white paper on pending projects and the reasons for delay. Thanks to inadequate investments, says the white paper, the railways have lost their traffic supremacy to roads. Trains now carry only 40 per cent of freight and 20 per cent of passengers, compared to 90 per cent and 80 per cent 50 years ago.
A huge backlog
The classical problem of the Railways is that they have been a favourite medium for successive governments, especially railway ministers, to bestow largesse on their constituencies and build vote-banks. As the white paper says, "in terms of new lines, the throwforward is over Rs 19,330 crore which, even without considering escalation costs, would take 40 years to complete at the present level of funding (annual outlays are about Rs 500 crore). Out of the basket, anyway, barely 10 per cent are financially remunerative." In terms of gauge conversion projects, which are worth Rs 9,100 crore and will take 10 to 11 years to complete (annual outlay of Rs 800 crore), over half are worthless.
But this government seems to be willing to go against the tide. "There are innumerable problems and persistent demands, both inside and outside Parliament, for speeding up work on various railway projects, for starting work on projects included in earlier railway budgets and for taking up new projects. But no one looks into the difficulties which come in the way of doing so," says Kumar.
The difficulties are: slow progress of projects which improve railway infrastructure and the inclusion of many projects in the budget without conducting feasibility studies or arranging finances for them. Moreover, according to government rules, the ideal shelf or backlog value of such projects should be about six times the annual outlay. This will put the ceiling at Rs 3,000 crore, while the actual shelf is of almost Rs 20,000 crore.
On top of this are projects which essentially serve a political purpose rather than a social or commercial one. According to railway officials, the previous government's decision to add six new zonal railway headquarters had put an unnecessary burden of Rs 1,200-1,500 crore on the railways considering the fact that setting up of each zonal headquarters costs anything between Rs 150 crore and Rs 500 crore.
Over the years, the Railways have faltered on generating own finances, while expenses have shot up. Staff costs are close to 56 per cent of the working expenses in 1998-99. Market borrowing through the Indian Railways Finance Corporation (IRFC) has become so costly that lease charges are estimated to touch Rs 2,392 crore, compared to an expected borrowing of Rs 2,404 crore. And capital support from the general exchequer has come down from 75 per cent of the Railways plan during the seventies to only 22 per cent in the current year.
Passengers pampered
As against these narrowing finance options, there has hardly been any correct rationalisation of passenger tariffs over the years. In the first Plan, for example, internal resources generated from tariff income funded two-thirds of the Plan outlay. In 1997-98, it provided only 41 per cent. In fact, the cross-subsidisation for passenger traffic comes to Rs 2,800 crore in 1997-98, says the status paper.
As a result, the paper says, funding of financially non-viable though socially relevant projects has become a key issue which requires resolution and unless additional resources outside the railway plan are secured, the pending projects as well as much-needed modernisation of rolling stock and locomotives will languish. The Standing Committee on Railways, too, has supported this viewpoint and said that budgetary support for the projects which are socially desirable must be made available by the Centre by declaring these projects national projects.
Keeping this in mind, the Working Group on Railway Projects for the Ninth Plan initially identified a Plan size of Rs 93,000 crore for not only aligning the growth of railway infrastructure with the projected GDP growth but also to increase the Railways' share of freight traffic by 5 per cent. An alternative scenario was also developed for securing a 7 per cent growth in freight traffic which estimated the fund requirement at Rs 85,000 crore. However, the Planning Commission recommended a Plan size of only Rs 47,500 crore which will leave the Railways going nowhere, laments the minister.
EXPERTS, however, feel that most of the Railways' problems are of the government's own making. Says former Railway Board member N. Venkateshan: "The indiscriminate sanctioning of projects without studying their feasibility is primarily because of the liberty given to Railway ministers and other politicians for this. The government has to discontinue this free hand to politicians to play with the nation's future. Even the present committee including the Finance and Planning Commission secretaries has no coordination and does not devote enough time to this. For instance, none of the chord lines are making money, defeating the entire purpose of conversion from meter gauge to broad gauge." Says another former railway official: "How can you have proper coordination when you have six chairmen of the Railway Board in five years?"
The ministry feels that if the Railways have to maintain its financial viability, market borrowings have to be kept under very close scrutiny and efforts have to be made to find cheaper resources by way of increased internal generation of funds and higher capital support from the government. Says Kumar: "We are trying to persuade the Planning Commission and the government to allot a larger Plan size for the Railways." He also feels that to achieve higher internal resource generation, projects requiring investments have to be restricted, by and large, to commercially viable ones so that adequate funds and operating surplus are generated.
Sadly, the Railways have suffered despite the fact that they are six times more energy-efficient than road transport, four times more economical in land use, six times more cost-effective in construction costs for comparable levels of traffic and being the only mode of transport which is able to use almost any form of primary energy. Globally, rail freight has grown faster than the GDP of a country—freight transport capacity should grow 1.5 times faster than GDP and passenger capacity, 1.8 times. In India, the corresponding figures are less than one.
Says Kumar: "It is necessary to point out that the Railways have not been given a level playing field vis-a-vis other key industries, despite the fact that it is the largest public sector organisation in the country and employs perhaps the largest number of people and caters to people from all walks of life. This is why it is losing out in the era of competition where people look for better value for the money they spend."
On the wrong track
Experts feel that the decline in freight growth is because of wrong policies. Says a Railway official: "We are losing out on freight primarily because of unfriendly freight rates. Added to this is the lack of availability of wagons, discontinuation of piecemeal booking system and lack of security of goods in the trains."
Lack of investment has also affected safety in Indian trains. Worldwide, signalling takes between eight per cent and 15 per cent of the total expenditure, whereas in India it is under three per cent. The only place where any such investment has happened—automatic signalling introduced—is Bombay suburban because of the high accident rates.
The committee which was studying the introduction of automatic signalling with the help of a German firm, was apparently terminated by former minister Ram Vilas Paswan because it would signal the loss of many jobs. Says Venkatesan: "Most governments and railway managements don't visualise the importance of safety which is probably the most crucial factor in these competitive times. It makes or breaks customers."
But what is the solution to this complex problem? While Kumar indicates that the white paper is but a pointer to the harsh realities before imposing the stern tightening up measures, Venkateshan advocates a systematic approach towards corporatisa-tion of the Railways. Says he: "In an era of privatisation, why can't the government introduce the Railways to pressures of the market forces? Look at what happened to Konkan Railways. The fear of labour unrest is just an excuse as the unions will accept the proposals if presented properly." At the same time, it is also necessary that the Railways learn to work with leaner systems rather than a multiplicity of levels.
The government is clear about what it wants to do. Says Kumar: "I have made my intentions very clear and I am very definite about what I want to do. But the need of the situation goes far beyond mere intentions and the white paper and requires immediate efforts." Will he succeed in taking the Railways into the next millennium in a dynamic new incarnation? The one crore plus commuters of India would like to know.