Uneven Buffers

If Suresh Prabhu looked relaxed after finance minister Arun Jaitley subsu­med the Railway Budget within the general budget on February 1, it perhaps also masked the loss of an opp­ortunity to helm a whole conceptual transition for the railways. Sure, Prabhu had been spared the onerous, but thankless job of trying to present a rosy picture of finances when none existed. He didn바카라�t have to spell out what happened to the High Speed Rail Authority, meant to implement the government바카라�s famous bullet train promise. Or how 48,000 hectares of vacant railway land could be monetised to shore up non-fare revenue. He didn바카라�t have to walk the populist track and announce a slew of new trains and lines. He didn바카라�t even have to touch the tricky area of fare hikes바카라�either risking one on the eve of crucial assembly polls, or letting status quo prevail and causing more harm to the financial health of the behemoth.

Instead, Jaitley made it easier by unveiling a new paradigm to fix passenger fares, essentially enabling a hike. Tariffs would henceforth be set 바카라�taking into consideration cost, quality of service, social obligation and competition from other forms of transport바카라�, he said. Sources in Rail Bhavan told Outlook that by introducing these criteria, the finance minister has freed the railway fare structure from populist and political pressures. 바카라�A hike in fares, especially in the highly subsidised passenger segments, including sleeper and non-AC classes, will soon be announced. It can be anything between seven to 10 per cent,바카라� a senior railway official disclosed.

Fares in AC I and II were already pretty high and, what바카라�s more, this is the segment that faces competition from airlines. So there was little scope for a hike there, the official explained. 바카라�There바카라�s still some margin (for a hike) in AC III. But the main target is likely to be non-AC classes where barely 35 per cent cost is recovered by railways. Even taking social obligation into account, at least 50 per cent cost should be recovered,바카라� he added. Suburban train fares, unchanged for years, could also see a hike.

Incidentally, Prabhu바카라�s pet theme of two years바카라�a Rail Development Authority (RDA)바카라�found no mention. Planned as an independent tariff and freight regulatory authority, its job was envisaged as delinking the fare and freight structure from political exigencies. The power to fix fares was to be transferred from politicians to technocrats, with the underpinning logic being economic rather than populist.

On a broader canvas, it was to be emp­owered to resolve disputes and ensure a level playing field for private investors. As for fare structures, a cabinet note on the RDA had underlined the nature of its autonomy. If the government did not 바카라�accept바카라� suggested tariffs, it would have to 바카라�compensate the organisation appropriately바카라�, it said.

Even an enhanced gross budgetary support of Rs 55,000 crore against an annual capital expenditure fixed at Rs 1,31,000 crore바카라�described as 바카라�unprecedented바카라� by Prabhu바카라�leaves the railways in need of extra-budgetary resources. 바카라�Since Jaitley has only announced the capex plan, it바카라�s the duty of the finance ministry to help us find that money. Any debt by a body like railways is a debt of the government too,바카라� Prabhu said after the budget.

A touch of controversy had already marked the Rs 94,000-crore capex figure for 2015-16, with railway officials themselves raising questions바카라�at least 25 per cent of it was not actually used to create capital, they said, but included money extended to implementing agencies for future works and equity infusion into rail PSUs. 바카라�The railways will have to be completely transparent in showing how they utilise the Rs 1.31 lakh-crore capex,바카라� a senior government functionary told Outlook. 바카라�They바카라�ve shown they lack a mechanism to spend this kind of money.바카라� The absence of a separate railway budget only sharpens the scepticism, he said. 바카라�Maybe the ministry should be asked to give some sort of a monthly report to the finance ministry.바카라�

Safety was the other big theme. The railways have been badly floundering of late, with three derailments in as many months killing 200 passengers. Rail officials say there is too much pressure on the system, with poor, ageing infrastructure and little time for maintenance. The move to set up a 바카라�Rashtriya Rail Sanraksha Kosh바카라� (Natio­nal Rail Safety Fund)바카라�with a corpus of

Rs 1 lakh-crore for five years바카라�was welcomed by most. Says D.P.S. San­dhu, a former railway officer now with audit firm KPMG: 바카라�With one billion tonnes of traffic and 23 million passengers daily, safety can바카라�t be undermined. The money needs to be spent carefully.바카라� Prabhu says India is 바카라�in talks with countries like Japan to know the best global practices.바카라�

Shifting the accounting method to an accrual system by 2018-19 was also a big reform step, according to Sandhu. The scrapping of the Foreign Investment Promotion Board may present a timely advantage to the railways, he feels, as it could robustly examine a new alternative source for funds. Listing railway PSUs such as IRCTC and IRCON on the stock exchange too will help unlock their underlying value, he feels.