After nearly a decade, and an impressive electoral victory, Mamata Banerjee returns to the railways to take up a major challenge. The railways have had a good run in recent years, but now face an uphill task in terms of both revenue and expenditure. Freight traffic, the biggest source of revenue, had been hit last year by the impact of the economic slowdown. There has been some recovery in the first two months of the current year, but the undercurrent of weakness remains. In particular, internal coal movement has been affected, even as the use of imported coal has gained in importance. Iron ore exports have dropped substantially from their peak, although consumption by domestic steel makers has improved after an initial setback. It is the same with the movement of finished steel, a sharp drop and then a partial recovery. Thus the railways have to plan for the current year, and formulate the final budget for 2009-10, in the context of a challenging revenue scenario.
There could of course be a silver lining, by way of strong economic recovery and therefore accelerated freight movement in the latter part of the year, but there is no hope of relief on the expenditure front. The burden of the pay commission's award, which hit last year’s numbers, is going to be even heavier in the current year. Sixty per cent of the arrears in wages have to be paid this year, after 40 per cent was paid last year. On top of that, staff salaries will be paid at the higher rate for all the 12 months of the current year when last year it was for seven months. Thus the railways will face pressure on their operating margins, with relief from perhaps a single source—lower diesel prices.
Under the circumstances, the railways will need imaginative leadership to cut costs wherever possible and devise innovative ways of raising additional revenue. There is no indication so far that Ms Banerjee is able to or even wants to think along these lines. Her previous stint as railway minister was marked by populism and she has lost no time in mentioning in her first interaction with the media her plans to issue highly subsidised railway passes for poor people. As the UPA feels its electoral victory has come from pursuing policies of inclusive growth, it can see a mandate for subsidising rail travel for the poor. But the very poor hardly travel, by whatever means, and as the railways over the last few years under Lalu Prasad have not raised passenger fares, the scope for action on that front is very limited.
Largesse can be handed out when there is buoyant revenue, for which action can usefully be taken in a few key areas. Quickly responding to changes in market conditions and offering bulk discounts to wean away traffic from road haulage, a strategy in place for several years, can be fine tuned further. Plus, the railways have taken important steps over the last few years to improve the quality of customer contact, both for those offering freight and for passengers. There is scope for the railways to become more customer-friendly and improve revenue flows. But the country’s political culture is such that the railway minister faces the maximum pressure from Parliament for projects that are usually unviable, whether it be a new train or expanding a service. Ms Banerjee’s own instincts point in that direction.
