Viability of freight tariff cuts not clear
Extravagant promises in a year in which there are no elections are very surprising, but the railway budget of the railway minister, Mamata Banerjee, tabled in Parliament on Tuesday, was full of them. There were two announcements of immediate consequence: there would be no increase in freight tariffs and passenger fares, and freight rates for foodgrain and fuel products (like kerosene and diesel) were actually cut. The cut in freight rates is an inflation fighting measure, given that consumer price inflation has been largely driven by food, and by fuel to a lesser extent.
From the viewpoint of financial prudence, however, the viability of these freight tariff reductions is not clear; a reduction in rates that boosts overall volumes and market share is economically justified, but the current policy of reducing rates year after year even as market share declines is unsustainable. From a capital expenditure perspective, the plan outlay is about Rs 41,430 crore, an amount that the minister may find difficult to raise, even with the help of the Indian Railways Finance Corporation. Instead of building schools and hospitals on it and running them, it may be more sensible to let the private sector build and manage them, while giving railway employees a concessional benefit.
The Telegraph, February 25
