Now that Dinesh Trivedi has resigned as railway minister, the fate of the fare increases he proposed is uncertain. His successor, also from the Trinamool Congress, may well roll back the increases, especially in second-class fares, which will be unfortunate. Mr Trivedi had shown the courage to stem the rot in the finances of the Indian Railways. His departure and the fear of an imminent fare rollback serve as a sad reminder that populism rules the roost and prudent management has few takers. If Mr Trivedi had indeed kept his party leader, Mamata Banerjee, in the dark about the fare increases then there is ground to seek his replacement. But it will be unwise to throw the baby out with the bathwater; let the reforms initiated by Mr Trivedi proceed.
For far too long the Indian Railways has kept fares very low. However, freight rates are increased every time the need is felt to augment its resources. As a result, freight rates in the country are abnormally high — so much so, Mr Trivedi admitted in his Budget speech, that the Railways could lose more business to truckers. Almost two-thirds of its earnings in 2011-12 came from freight. This exposes it to grave risk in the event of an economic slowdown when freight movement reduces. This is precisely what impacted the Railways in 2011-12. The surplus (excess of receipt over expenditure) plummeted to Rs 1,492 crore (from almost Rs 14,500 crore in 2010-11), leaving precious little for the Development Fund (Rs 550 crore) and the Capital Fund (Rs 942 crore). The Indian Railways was bailed out by the finance ministry, which gave it a loan of Rs 3,000 crore. Mr Trivedi’s speech was peppered with various references to the precarious nature of the Railways’ finances. He admitted that close to 500 works and special projects in the north-east and Jammu & Kashmir were facing delays, thanks to the paucity of funds. Even meeting day-to-day expenses had become difficult. Acknowledgement of crisis is often the first step towards reform. With freight rates already at such high levels, there is now no option but for the passengers (30 million a day) to pay more. Strangely, while Ms Banerjee has got so worked up over the higher fares, there hasn’t been a murmur of protest from the passengers. The fares have been raised after a gap of eight long years; incomes have gone up significantly since then. Even the railway trade unions don’t want a rollback. They know it’s important if the Indian Railways is to stay in good financial health.
Mr Trivedi must also be lauded for proposing a body of experts to examine the feasibility of an independent Railway Tariff Regulatory Authority. If this goal is achieved, it will insulate tariff and fare changes against all political interference. Mr Trivedi was also considering segregating the fuel component in the cost of passenger services, which can then be raised or lowered with every change in fuel price. These proposals cannot be postponed any further. The biggest service the new minister could do the aam admi is to leave Mr Trivedi’s Budget alone.