Indian Railways: On the right track

It is expected that Rs 14,500 crore will be saved through electrification of broad gauge routes. Multitasking and better utilisation of manpower resources is helping in massive productivity gains.

By Naresh Salecha

The once-in-a-century challenge the humanity faced in the form of Covid-19 has altered both consumers and businesses at a fundamental level. Drawing up the Budget has always been a tenacious exercise. The challenge at the Indian Railways (IR) was accentuated by the lockdown, resulting which passenger train operations were hit and so were revenues. Critics point that operating ratio of the IR has deteriorated and it is becoming financially unsustainable. In past decades, the IR has faced such challenges many times and each time it rebounded strongly, silencing naysayers.

Problems at the IR were well known to committees. The IR is reinventing itself—be it the bureaucratic obese structure or the ‘empire building’ mindset. Recent reforms at the Rail Bhavan are a testament not only to identifying the issues, but also addressing them immediately. The reorganisation of the Board has put an end to decades-old departmental mindset. One should also consider the reforms that the IR has undertaken while analysing the ills and shortcomings to get a clearer picture.

Coming back to railway finances, it is true that the IR has faced financial challenges in recent times. But that has been the case whenever new Pay Commission recommendations were implemented. Businesses can’t and shouldn’t consider short-term solutions. Raising freight tariffs beyond a point are counterproductive both for the IR and for the economy.

The IR, till recently, has been meeting all its revenue expenditure from its revenue receipts. Any short-term gap because of the pandemic or a slowdown can’t be a reason to write off the railways. Even when all operations were halted and with no revenues, the IR ensured timely payments of all its dues on account of salary, pensions, lease charges, etc. Thus, its expenditure optimisation should be applauded. Without compromising on safety and security, it has projected savings of `22,000 crore in RE, aided in part by timely policy interventions by the government. Investment on electrification in the past is paying rich dividends. It is expected that Rs 14,500 crore will be saved through electrification of broad gauge routes. Multitasking and better utilisation of manpower resources is helping in massive productivity gains.

While RE has projected an operating ratio of 96.96, this is on account of support from the finance ministry to meet short-term resource gap. The support extended by the government will ensure that the IR remains financially viable and is able to pay back the advance expeditiously.

Unparalleled challenges thrown up by Covid-19 only strengthened the tenacity of the IR to ensure an exceptional all-round performance despite obstacles. The freight business has been breaking records like never before, and business development is reaching new dimensions each day. Formation of business development units (BDUs) at division and zonal levels, doubling of speed of freight trains from 23 km/h to 46 km/h, introduction of time-tabled parcel trains and ongoing freight rationalisation including concessions have shown positive impact on the loading trends. The speeding up of trains is a better indicator of asset utilisation from a customer’s perspective. The planned capex and introduction of new technologies will ensure better and safe utilisation of assets. Railways is a derived demand. A slowdown in global economy also adversely impacts demand for railway freight. Long-term impact of the pandemic on passenger operations is also being studied.

‘Building wealth is not a sprint. It’s a marathon’. The creation of infrastructure is essential for economic development and atmanirbharta. The IR not only maintained its capex targets in RE, but is on its way to meet them. The General Budget 2021-22 has been momentous for the IR—it saw a ‘record’ allocation of Rs 1.1 lakh crore, with total capital expenditure outlay of Rs 2.15 lakh crore for 2021-22.

Creation of national infrastructure should not be viewed from the narrow prism of return on capital. Railway projects or any infra projects impact the socio-economic conditions for entire populations. If rate of return is taken as the only benchmark, then only business centres will be having rail connectivity, and the hinterland will be deprived of safe and environmentally advantageous connectivity.

The capex plan will enable the IR to fund projects under the NIP and to priority projects under Vision 2024. Extra-budgetary resources are being raised at extremely competitive rates to fund remunerative projects. This is being done with adequate moratorium to enable these projects to be self-sustaining without leading the railways towards debt trap.

Higher capital budget will help complete national projects in J&K, Himachal, Uttarakhand and North-East. National projects were allocated the highest ever outlay of Rs 12,985 crore in BE 2021-22 against RE 2020-21 of Rs 7,535 crore, i.e. an increase of 72%.

Dedicated freight corridors and other throughput enhancement projects are on track—Rs 37,270 crore of capital allocated for investment in companies with allocation for the Dedicated Freight Corridor Corporation of India of Rs 16,086 crore, the National High Speed Rail Corporation Ltd of Rs 14,000 crore, and the Kolkata Metro Rail Corporation Ltd of Rs 900 crore. These projects and other infrastructure and safety works will give a boost to the construction industry, resulting in employment generation. Railway capital spending has a huge multiplier effect on the economy. The IR is constantly adapting to changing business requirements, reinventing itself and ensuring its place as the lifeline of the nation, while meeting the social obligations out of its revenues.

The author is member, Finance, and ex-officio secretary to Government, Railway Board, Ministry of Railways. Views are personal