Tuesday, February 17, 2009

Interim Railway Budget (2009-10)

Shying away from presenting a populist budget just before the 15th Lok Sabha elections, the Railway Minister Lalu Prasad Yadav has, lived up to his promise of easing the common man’s burden and announced an across the board two per cent cut in rail fares. Presenting his sixth and the last budget of the UPA Government, ie, Interim Railway Budget for 2009-10, before it faces the electorate, the Minister has set a record of sorts. Despite reducing fares in his successive budgets since 2004, he has managed to not only turn around the Railways, which was heading for a sure economic crash, but also generated higher revenues year after year.
The Railway Minister also made an announcement for introducing 43 new trains, extension of 14 and an increase in the frequency of 14 others, apart from earmarking a higher plan outlay of Rs 37,905 crore towards expansion in the next fiscal year. He also announced reduction in the fares of the ordinary passenger trains by Re one for ticket costing up to Rs 50 for journey above 10 km.
Freight Rates Unchanged
The Railway Minister also left the freight rates unchanged to keep traffic from shifting to road transport that has become cheaper following cut in diesel prices. The Minister said that a number of steps had been taken to increase freight revenue. These include transporting double-stack containers on the electrified Western Dedicated Freight Corridor, and improving wagon design to increase capacity of goods rakes by 78 per cent. Construction of Eastern Freight Corridor had also commenced, while adding that the average annual growth rate of freight loading increased from around three percent in the last decade to about eight per cent.
However, a freight reduction could have helped the battered India Inc, especially since the Government, unlike the cash-rich Railways, is hard-pressed for resources to bail out industry. Perhaps, he has left the issue to be resolved by the next Government at the Centre.
Respecting the aspirations of the long distance passengers he has decided to reduce the second class and sleeper class fares of all mail and express and ordinary passenger trains by two per cent for the ticket costing more than Rs 50. He said during the last four years, he had reduced the fares of AC First Class by 28 per cent and AC II tier by 20 per cent. The Indian Railways are the second largest railroad in the world under a single management, running more than 11,000 trains every day, 7,000 of which are for passengers.
The network comprises 108,706 km and ferries 14 million passengers daily from 6,853 stations across the length and breadth of the country. “Earlier, at the time of the railway budget, people used to be apprehensive about the possible increase in passenger fares; now, on the other hand on the eve of my budget, people appear not only hopeful but sanguine about the likely reduction in passenger fares. The Railway Minister also announced four more “Garib Raths” - low-cost AC trains. Notably, 604 new trains have been introduced in Lalu’s tenure. Even as air travel is reflecting reduction in number of passengers due to economic downturn, there has been a significant increase in the number of rail passengers.
Impressive Performance
The Railways has managed to turn in an impressive performance generating a cash surplus of Rs.19,320 crore (before tax) for 2008-09, despite the adverse impact of economic slowdown and decline in industrial growth; the total surplus gained over the past five years is Rs.90,000 crore. This reinforces the internationally acclaimed turnaround Mr. Lalu Prasad has brought about during his tenure. Predictably, the budget had its own liberal quota of proposals for new trains, new lines, gauge conversion, and doubling of track. Capping them all was the proposal to conduct a pre-feasibility study for running a bullet train between New Delhi and Patna. The Minister also promised to look at the feasibility of launching bullet trains on six other routes.
Potentially capping his stint as Railway Minister, the budget is a fairly accurate pointer to Lalu's performance over the past few years. Infrastructure has improved steadily, train services have been expanded the interim budget has inked in 43 new train services to be started in 2009-10 and there has been an upward trend in passenger volume with growth in the coming year estimated at seven per cent. However, the perception that Lalu has engineered this turnaround from a standing start is not entirely accurate. Some of his much-touted initiatives such as boosting revenue by increasing freight load per train have taken off from infrastructure renewal undertaken by his predecessor, Nitish Kumar. Likewise, retrenchment, an imperative for increased efficiency and revenue savings was undertaken substantially during Nitish's term.
The organsiation runs 11,000 trains and carries 14 million passengers everyday, and the network is the second largest in the world. To be fair, under Lalu, the Railways has cut costs, increased passenger occupancy and replaced outdated diesel engines with new, fuel-efficient locomotives. He has proved to the management schools that populism and profitability are not incompatible.

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