Wrong medicine

The government has not imposed any new levies in the railway budget as it is a vote on account exercise.

But this has not prevented it from distributing pre-election largesse. Such profligate spending without resource mobilisation will only worsen the railways' finances.

The deterioration in the railways' finances is explicit in the government's own budgetary figures. The operating ratio, which measures how much of the railways' revenues go to meeting operating expenses, is slated to go up next year (that is, less of a surplus will be available).

The railways have no time to lose because they are at the edge of a crisis.

The first is the mounting pension obligation. The correct thing to do would have been to publish a white paper, outlining how the problem will escalate and posing various policy alternatives to tackle the problem, in order to initiate a public debate.

Instead, Nitish Kumar has cut the appropriation to the pension fund by Rs 295 crore. It is difficult to do worse. The second long-term challenge before the railways is to address two inter-related issues.

High Indian logistical costs, which detract from the country's global competitiveness, have to be brought down and the railways have to win back market share from road haulers.

Both are achieved by offering customers better value. The railways have sought to do this in recent years through freight rate rationalisation. Consequently, even in a boom year when freight tonnage has exceeded the target, freight revenue has missed the target. This is not bad in itself as customers are getting better value for money.

But such an exercise has to be accompanied by severe cost reduction. This has been attempted in part by cutting projected expenditure by nearly Rs 1,500 crore.

But the continued impact of this in the coming year is likely to be partly negated by the single biggest misadventure contained in the budget, the 17 new long distance passenger trains linking state capitals to the national capital.

Long distance passenger trains lose money and clog the tracks, preventing the railways from running the fast freight trains that make money.

What is more, some of the routes on which the new trains have been announced are already well served and the existing trains do not have full occupancy. So this is something the public does not need.

But it has been announced by the minister so that politicians of the ruling combine can go to their respective constituencies during election campaigning and hold this up as an example of what the government is doing for them.

They will also talk about the Rs 20,000 crore to be spent on linking remote areas and the thousands of jobs this will create, though it is not at all clear where the money will come from.

What the railways need is the sort of medicine that the Rakesh Mohan committee had recommended; what they have got is a little more of the old unhealthy diet.