An amateurish reform agenda: R Sivadasan

This is an apparently simple "please all" pre-election budget, with a thoroughly amateurish reform agenda as its most striking feature. After accommodating all the run-of-the-mill details of routine performance and safety schemes of various railway board directorates, Mr Bansal has pushed the reform agenda in his speech. The trouble is that he did not say things in a straightforward manner. What he wanted to say was that the railways need trillions of rupees to fund modernisation, safety and network expansion projects, and that kind of huge sums cannot be generated by the government from internal resources and budgetary support. Therefore, the railways have to depend upon private partnerships to support development. To attract private partnerships, the presence of a regulatory mechanism is a must. Instead of this straight talk, this rail budget does a kind of soap opera, which we thought only advertisers sponsors.

First, in para 8 of the budget speech, he agonises on the Rs 24,600-crore losses incurred from passenger services. He is silent about the fare hike from 27 paise/km to 33 paise/km, which should help reduce losses. Then he worries about the drop in goods traffic volume but does not link it to the unusually massive freight rate hike by Dinesh Trivedi. Then, in para 66 of the speech, he celebrates his achievement in improving the operating ratio. Now, people are confused. People suspect that though he loses Rs 24,000 crore in passenger business, he makes super-normal profits in the freight business to not only extinguish passenger losses but achieve an overall profit of Rs 10,409 crore. So, why is he still wailing?

In para 74, he goes for gentle persuasion for a future, regular, five-six per cent annual hike in passenger fares. Now, how to do that? Simple. Create a Rail Tariff Authority (RTA). This is where the railway men have confused him.

First, by not calling it a Regulatory Authority, and then by proposing to man it with retired bureaucrats, as I hear. But, what weight would the recommendations of a RTA, manned by retired bureaucrats, carry before Parliament, which exercises direct oversight on the fares and rate structure of the national transporter from pre-Independence days?

Or, is this a signal to dispense with the rail budget and, hence, direct Parliament oversight altogether? Will the Centre shed its powers of setting rates to a retired bureaucrat manned RTA mechanism? Is the Ministry of Railways aware that by creating an RTA, it is shooting at its own feet? Can we prevent the RTA from hearing petitions on freight rates imbalances? Then what will happen to the supernormal profits of the freight business? At the end of the day, the railways' finances will not be significantly different from the position today. This issue needs a national debate, and not a quick Cabinet decision. The author stands for a healthy fare and rate structure, use of PPPs for rail development and an effective rail regulator. But the way in which this decision is sought to be achieved, through this soap opera, is not correct.

R Sivadasan
Former Financial Commissioner, Indian Railways