A K Bhattacharya: The irrelevance of railway Budgets

NEW DELHI DIARY

If you needed any more justification for scrapping the current practice of presenting the annual Budget for the Indian Railways in the Lok Sabha, here it was.

Yesterday, Railway Minister Lalu Prasad took one hour and fifty minutes to deliver what must be one of the longest Railway Budget speeches made in the history of Indian parliament.

Fortunately, the BJP members of the Lok Sabha had boycotted the session and as a result there were very few interruptions. Had the BJP worthies been there, Lalu Prasad could have held forth for more than two hours and made it more boring.

Why should so much time of the Lok Sabha be taken up for reading out what the Indian Railways plan to do for the next financial year? A large number of issues covered by Lalu Prasad in his speech were fairly mundane and pertained to rudimentary changes.

Consider some of them: introduction of crew-friendly driver's cab and brake van, computer-based centralised traffic controls and a material management information system, e-procurement, improvements in claims management, simplification of refund procedures, improvement in cleanliness, introduction of an environment-friendly toilet system, facilities for licensed porters, use of handloom and khadi for all railway upholstery, concessions to customers, free travel facility for unemployed youth, new trains including their extension as well as increase in frequency and a large number of new projects for new lines, gauge conversion and surveys for new lines.

Most of these announcements could have been easily made by the Railway Board chairman at any time during the year, as these pertain to improvements in services and facilities offered to the railway users. Why should these wait to be announced by the railway minister as part of his Budget speech?

Clearly, the purpose behind the 110-minute exercise was political. Like many of his predecessors, Lalu Prasad too wanted to use the Indian Railways to build the vote bank for himself and for his party.

That feeling gets further endorsed when you realise that there was no increase in either the passenger fares or the freight rates. There was some concession for movement of machinery for the power sector. And the only revenue mobilisation effort was through an increase in the parcel rates in Rajdhani trains. Politically, nothing could be less controversial.

Ironically, Lalu Prasad has kept fares and freight rates largely unchanged at a time when the Indian Railways is facing increasing competition from the roads as well as the aviation sectors.

With low-cost airlines threatening to take away a substantial chunk of the railway passengers and the road transport sector increasing its share in the total freight movement, the Indian Railways cannot afford to stick to the system of fixed fares and freight to be announced once a year through the Budget.

Railway fares and freight rates must become more flexible and must respond to competition through periodic adjustments. In any case, there is no legal or constitutional compulsion for the Indian Railways to get Parliament's approval before announcing any change in its fares or freight rates. It can do so as and when the need arises.

Look at the Indian Railways' problems from another way. Lalu Prasad's Budget speech ran up to 44 pages. Of these, only seven pages contained the crucial aspects of the Railway Budget for 2004-05, namely the revenue and expenditure estimates, additional resource mobilisation efforts (of which there was no significant proposal in this Budget) and the annual plan outlay for the current year.

The remaining 37 pages contained the elaborate listings of the new towns and villages which are going to be surveyed for new lines, new train services and new passenger facilities of the kind enumerated above.

Indeed, that sums up the completely misplaced priorities of those who are at the helm of the Indian Railways. And this can be set right only when it moves away from the practice of the annual ritual of Budgets and their presentation by the railway minister.

There is yet another reason for putting an end to this meaningless ritual. The Railways' gross traffic receipts were estimated at Rs 42,605 crore last financial year. If you compare this with the net sales of some of India's top companies, you will realise how small Indian Railways has become as an economic entity.

There are at least five companies, which have a higher turnover than the Indian Railways' gross traffic receipts. Of these, four are public sector companies functioning under the administrative control of the Ministry of Petroleum and Natural Gas.

If these companies can do without the fanfare of an annual budget exercise, there is no reason why the Indian Railways too cannot maintain a low profile. True, the Indian Railways is not a PSU. But it certainly can function like one by responding to market challenges, instead of relying on a central minister to make an annual Budget speech in the Lok Sabha.

There was a time when the Department of Telecommunications also used to table in Parliament a separate Budget statement on its revenue, expenditure and new tariff proposals, along with the presentation of the Union Budget. That practice was done away with in the 1980s.

For how long does one have to wait before the annual railway Budget ritual also meets the same fate?

akb@business-standard.com