A K Bhattacharya: Stop fiddling with the railways

NEW DELHI DIARY

If you believe Railways Minister Lalu Prasad, then expect some dramatic improvements in the performance of the Indian Railways in this financial year.

Not surprisingly, he is leaving no stone unturned to tell the world about his achievements. A national media campaign has been launched to tell the country about Lalu Prasad's visionary leadership that is helping the Indian Railways to script its financial turnaround.

If you thought Lalu Prasad was keen only on promoting himself, think again. No move of his is usually without a hidden political agenda aimed at embarrassing his rivals in politics. In this case, he is comparing 2005 with what the state of the Indian Railways was in 2001.

This was the year when Mamata Banerjee was the railways minister. A year later, Nitish Kumar took charge of the ministry. So, by comparing what he is likely to achieve this year with 2001, he is hitting at both Kumar and Banerjee.

Consider Lalu Prasad's claims of what he has done for the Indian Railways. Its profit or surplus before paying dividends will go up to Rs 4,300 crore in 2005-06. What was it like in 2001? Well, Lalu Prasad uses the Rakesh Mohan committee's report on the Indian Railways to prove his point.

Submitted in July 2001, the committee observed the following: "Today the Indian Railways is on the verge of a financial crisis. Even at the operating level, the Indian Railways is in a terminal debt trap".

The operating ratio (the share of operating expenditure in total revenue) is also on the decline. This is a positive development. It was 98 in 2001 and is set to go below 90 in 2005-06.

With a lower operating ratio, the Railways will have more resources left with it to spend on expansion and safety. Even on the question of paying dividends to the central government, the Railways has done better in the last two years.

In 2005-06, it will meet its deferred as well as current dividend payments liability of over Rs 4,000 crore. In 2001, it deferred its dividend liability of Rs 2,800 crore.

You can't even accuse Lalu Prasad of not having taken care of the future. He has promised to provide Rs 10,000 crore for the capital fund, which is used for financing new railway projects and lines.

In comparison, the provision for the capital fund in 2001 was only Rs 350 crore. While the share of the Railways' traffic in total cargo moved across the country has gradually increased, Lalu Prasad's master stroke seems to be to increase volumes to reduce the unit cost of freight and passenger movements. In other words, he will not touch freight rates and passenger fares, while his rivals in 2001 increased both.

It's true Lalu Prasad's claims do not say a word about the burgeoning pension liability that the Railways will have to meet in the coming years. There is also no mention of the massive resources required to upgrade and expand the Railways. Nor does he have any plan to restructure the Railways, as suggested by several experts committees to usher in more competition and greater efficiency in railway service.

The big relief for everyone, however, is that in spite of Lalu Prasad at the helm, the Indian Railways has done much better than what it was expected to do. Perhaps, Mr Prasad allowed his officials at Rail Bhavan to run the railways as they thought were the best course.

So, the railway bureaucracy had a free hand, as long as it assured Lalu Prasad that there would be no increase in passenger fares and freight rates.

Riding on steady economic growth of 6-7 per cent for the last few years, it was but natural for the Railways to grow volumes and earn surpluses. Today, Lalu Prasad is reaping the benefits of a growing economy and his policy of granting operational freedom to the top managers at Rail Bhavan.

But such success has its problems too. Lalu Prasad now wants new projects to be managed by the Indian Railways. For him, more projects mean more jobs. And more jobs mean more opportunity for him politically. Which is why, Lalu Prasad is trying hard to get the proposed Rs 25,000 crore new railway freight corridors being constructed to connect Delhi with Mumbai and Kolkata.

The Japanese government is committed to provide funds for this project, which, when completed, will allow fast rail movement of goods on these two sectors. The project can be remunerative provided it is implemented efficiently and is run on commercial principles.

It shouldn't take long for anyone to understand why the new freight corridor project should be set up and run by an independent authority.

The Indian Railways runs an underground metro rail service in Kolkata. It took 16 years to build that network of 17 km. Today, it is not a profitable venture. In sharp contrast, the Delhi Metro is being constructed by an independent company. Its 60-km-long network will be completed in less than seven years.

More importantly, the new service has already become profitable. Lalu can continue to fiddle around with the Indian Railways. But the new freight corridor project should be entrusted with a new body.