 "A quiet Budget: Samar Jha")
The second Budget presented by Railway Minister Suresh Prabhu has left many citizens flummoxed. Is this a good or bad Budget? How can it not be good when fares and freight have not been increased! However, not announcing any new trains or project is bad and contrary to the stated objective of providing better and increased rail services. The Budget can be variously described as insipid, lack-lustre or non-populist. But what is the truth?
The figures first. Contrary to rumours of poor freight loading and depressed passenger numbers leading to plummeting revenues in the current year, Prabhu seems to have taken out a genie from his bag and fixed the revised target for operating ratio (OR) at 90 per cent. To make the projections even more curious, the OR target for 2016-17 has been pegged at 92 per cent despite the projected massive payouts from the Seventh Pay Commission award. How has this magic been achieved?
The minister explains that cost cutting has released an additional Rs 8,724 crore, a major chunk of which comes from reduction of energy bills by re-negotiating tariffs with electrical utilities, and of course falling prices of oil. An insidious cost reduction is in appropriation to Depreciation Reserve Fund (DRF), which has come down from Rs 7,900 crore in the Budget estimates to Rs 5,500 crore in the revised estimates. Even more worrying is the projection of a mere Rs 3,200-crore appropriation in 2016-17. Even the physical target for track renewal, vital for safety, has been reduced to 1,500 km from 2,300 km in 2015-16. Achieving financial targets at the cost of safety is certainly not desirable.
If the Railways is able to keep down ordinary working expenses to the projected Rs 1.23 lakh crore, an increase of a mere Rs 12,870 crore, after bearing the burden of the pay commission award, it would be an achievement. The concern is the earnings target of Rs 1.84 lakh crore. Is this reachable, especially looking at the poor performance on the earnings side in the current year? Partly. The economy as a whole will have a bearing on this. If growth in manufacturing and infrastructure is robust, the Railways may feel sanguine. But it is a very big If.
There are many positives in this Budget. For the first time in years, the minister has focussed on railway management. He has announced the revamping of the Railway Board on lines of businesses, with real powers to the chairman, who is one among equals in today's system. The memoranda of understanding with zones, writing down the key result areas (KRAs) of managers, a holding company for the Railways' public sector undertakings and information technology-based internal audit studies are important steps. Many of these are part of the recommendations of the Bibek Debroy Committee. It is heartening to see that finally this report is being given the importance it deserves.
Prabhu's focus on infrastructure growth is commendable. The announcement of taking up three more DFC alignments is not a day too soon. His innovative measures to raise finances for projects are beginning to bear fruit. While he did say he would strengthen the PPP cell in the Railway Board, his target of Rs 18,340 crore for investments from PPP appears to be over ambitious. The National Rail Plan that he proposes to prepare is a good step. China had one ready in the 1980s, and implemented it with zeal, and look where it has taken them.
The Minister would have received higher marks if only he had given more targets for implementing his announcements. For example, while he has given a target for his mission to introduce 25-tonne axle load, there are no targets for Train Collision Avoidance System and Mission Raftaar. He has also not given any deadline for universal bio-toilets.
This is a quiet Budget, no big bang announcements. For that reason, it is probably a Budget which will deliver. The Railways have to work very hard and accept institutional changes for Prabhu to realise his dreams. He has to carry the railway management and staff with him on this journey. One can only hope he is up to the task.
The figures first. Contrary to rumours of poor freight loading and depressed passenger numbers leading to plummeting revenues in the current year, Prabhu seems to have taken out a genie from his bag and fixed the revised target for operating ratio (OR) at 90 per cent. To make the projections even more curious, the OR target for 2016-17 has been pegged at 92 per cent despite the projected massive payouts from the Seventh Pay Commission award. How has this magic been achieved?
The minister explains that cost cutting has released an additional Rs 8,724 crore, a major chunk of which comes from reduction of energy bills by re-negotiating tariffs with electrical utilities, and of course falling prices of oil. An insidious cost reduction is in appropriation to Depreciation Reserve Fund (DRF), which has come down from Rs 7,900 crore in the Budget estimates to Rs 5,500 crore in the revised estimates. Even more worrying is the projection of a mere Rs 3,200-crore appropriation in 2016-17. Even the physical target for track renewal, vital for safety, has been reduced to 1,500 km from 2,300 km in 2015-16. Achieving financial targets at the cost of safety is certainly not desirable.
If the Railways is able to keep down ordinary working expenses to the projected Rs 1.23 lakh crore, an increase of a mere Rs 12,870 crore, after bearing the burden of the pay commission award, it would be an achievement. The concern is the earnings target of Rs 1.84 lakh crore. Is this reachable, especially looking at the poor performance on the earnings side in the current year? Partly. The economy as a whole will have a bearing on this. If growth in manufacturing and infrastructure is robust, the Railways may feel sanguine. But it is a very big If.
There are many positives in this Budget. For the first time in years, the minister has focussed on railway management. He has announced the revamping of the Railway Board on lines of businesses, with real powers to the chairman, who is one among equals in today's system. The memoranda of understanding with zones, writing down the key result areas (KRAs) of managers, a holding company for the Railways' public sector undertakings and information technology-based internal audit studies are important steps. Many of these are part of the recommendations of the Bibek Debroy Committee. It is heartening to see that finally this report is being given the importance it deserves.
Prabhu's focus on infrastructure growth is commendable. The announcement of taking up three more DFC alignments is not a day too soon. His innovative measures to raise finances for projects are beginning to bear fruit. While he did say he would strengthen the PPP cell in the Railway Board, his target of Rs 18,340 crore for investments from PPP appears to be over ambitious. The National Rail Plan that he proposes to prepare is a good step. China had one ready in the 1980s, and implemented it with zeal, and look where it has taken them.
The Minister would have received higher marks if only he had given more targets for implementing his announcements. For example, while he has given a target for his mission to introduce 25-tonne axle load, there are no targets for Train Collision Avoidance System and Mission Raftaar. He has also not given any deadline for universal bio-toilets.
This is a quiet Budget, no big bang announcements. For that reason, it is probably a Budget which will deliver. The Railways have to work very hard and accept institutional changes for Prabhu to realise his dreams. He has to carry the railway management and staff with him on this journey. One can only hope he is up to the task.
Samar Jha
Former Financial Commissioner, Indian Railways
Former Financial Commissioner, Indian Railways