Don't get carried away

The reprieve that the railway minister, Lalu Prasad, has gained by both he and his wife Rabri Devi being acquitted of the charge of owning assets disproportionate to their incomes, removes the danger of his political career suffering a sharp setback. It also allows the minister to focus on delivering what he has already been doing very well""a turnaround at Rail Bhavan. The officials who have been scripting this revival of the national carrier appear to have got their priorities right, going by the massive investment targets that they have set for themselves for the next financial year. The final size of the investment plan for the railways will be determined by the Planning Commission, keeping in sight the amount that the finance ministry is willing to spare and the earnings of the railways. All ministries pitch their sights high and most eventually get less than what they initially ask for, but the railways have almost everything going for them""most of all, their own performance in recent years.

Looking at the trend in railway freight revenue (Rs 27,000 crore till November), there is every likelihood that the railways will meet their ambitious target of Rs 40,000 crore for the full financial year. The remaining months to March are very much a part of the busy season of the Indian economy, which shows no signs of decelerating; if anything, business next year looks likely to be even better than in the current year. Second, when the economy does well, not only do the railways get more freight to carry, the coffers of the government ring nicely with cash coming in. This allows the finance ministry to be more generous than would otherwise be the case. Last year (2005-06) the railways' cash generation went up by a massive 50 per cent to Rs 9,113 crore. In the current year, the railway minister has talked of raising it further to a scarcely imaginable Rs 21,000 crore. So it is reasonable for the railways to want to plan big.

It is important, however, that the railways do not get carried away and maintain a high level of borrowing. In the current year, the railways have projected borrowings to account for 22 per cent of plan expenditure, the same as it had done last year. If internal cash generation is good, then the aim in the next year should be to reduce dependence on borrowing. What is even more important is to spend the money right. The temptation to spend on glamorous projects like bullet trains to gain brownie points with the high- profile urban set should be resisted. Instead, every effort should be made to take forward key projects like the high-speed freight corridor, which will bring about a sea change in the country's logistics scene and make the economy more competitive and productive. It is also vital to undertake unglamorous balancing expenditure, in facilities like signalling and goods-handling capabilities, without which high-ticket investments like the freight corridor will not be able to deliver their full potential in terms of benefits. It is no use goods travelling fast on the dedicated corridor and then getting stuck just outside a railway station or yard. The railways have rightly been heaped with praise for their turnaround in recent years; this should not make them complacent because the task of rejuvenating and modernising the rail system has just begun and there is a long way to go.