Poor demand conditions are outside Railway Minister Suresh Prabhu's control. He has at least done something to control costs: Working expenses in the revised estimates have been cut by seven per cent. If they are up about 12 per cent in the estimates for the next year, that is the pay commission's impact. On the whole, Mr Prabhu deserves credit for trying to minimise the financial damage. He has also not strayed from the right path on framing a freight policy, undertaking organisational restructuring and stepping up investments while remaining focused on his customers. But several issues need highlighting. He has not lost sight of reforms but moved slowly on them in the current year. Ideas on restructuring and setting up a tariff authority have been around for a long time but they are not yet in place. Even preparing an alternative accrual-based set of accounts, on which there is no controversy, is yet to be completed. But the crucial question is: what are the economic growth assumptions for next year on the basis of which Mr Prabhu has budgeted for growth in both freight and passenger revenues? These have after all been revised downwards sharply in the current year.
Perhaps most critically, the Railway Budget has not shed any light on how to engage with the railways' huge workforce. There is no progress towards ideas that non-core activities like security (Railway Protection Force) and running hospitals and schools should be hived off. Staff and pension expenses already account for almost half of total expenditure. After the blow delivered by the pay commission, their share of expenditure will go up further. Control on this front is a survival issue for the railways, but Mr Prabhu has not begun to tackle it.