Rail Budget 2013: Pawan Kumar Bansal's self-imposed austerity may hit expansion plans, result in Rs.24,600 cr loss
This is the story of a bankrupt railways, struggling to stay on track. The portents are grim. In dealing with a creaking system, warped priorities on resource generation and statistical sleight of hand that drained its treasury, the first rail budget to be presented by the Congress Party since 1996 left the new minister with few choices - except when it came to yanking it out of the hand of regional chieftains to give it a pan-India image.
Railway Budget 2013: Highlights
Bansal had to choose between a rock and a hard place. Populist schemes over time have resulted in losses to the tune of Rs.24,600 crore. Besides, the Railways will likely miss the total resource mobilisation of Rs.1.35 lakh crore set for 2012-13. It is expected to fall short of targeted revenues by as much as Rs.7,491.66 crore mainly due to lower passenger and freight earnings.
Full Coverage: Budget 2013
As per official data, Railways is projected to see gross receipts Rs.1.28 lakh crore for the fiscal ending March 31, 2013, compared to the budget estimate of Rs.1.35 lakh crore. In his Budget speech, Bansal clearly stated that the shortfall in revenue mobilisation, both from passenger and freight movement, will be to the tune of Rs.3,573 crore and Rs.3,383 crore respectively as compared to the Budget estimates for 2012-13.
There was the challenge of raising revenues to modernise the network without alienating voters ahead of the Lok Sabha elections. India's railway will now borrow Rs.15,100 crore from markets for the financial year 2013-2014, Bansal said as he presented his Budget.
Bansal might have resisted the temptation to go in for another round of passenger fare hike after January, but he did hike freight rates by 5 per cent and proposed cost increases through the back door - like supplementary charges for superfast trains, higher cancellation charges and tatkal charge apart from reservation fee and clerkage charge.
Railways had hiked the fares on January 21 which ensured it an additional revenue of Rs.6,600 crore. But immediately afterwards, the diesel price hike took away almost half of that earning. "We have to adjust something, somewhere,'' said a senior Railway Board member, requesting anonymity.
Bansal also surprised many by falling back on his predecessor Dinesh Trivedi's "fuel adjustment component'' policy and he also put the burden of the diesel hike on the freight sector.
"The main read-through to the Union budget is that government spending will likely rise at a slower pace and suppressed prices will be passed on to consumers, but only at a very gradual pace due to the risk of consumer backlash ahead of the elections," said Sonal Varma, an economist at Nomura.
"It does seem that he has… tried to toe the line between the requirement of getting points before the election and looking at a better financial position for the railways," said Jyotinder Kaur, an economist at HDFC Bank.
But in a sign of tougher reform measures to come further down the line, Bansal proposed partially deregulating ticket prices, linking both passenger and freight rates to the cost of diesel.
Earlier this year, India began a gradual deregulation of diesel, which is currently heavily subsidised. By levying a fuel adjustment charge on petro products, the minister was laying the base for inflationary trends to get a boost.
Faced with a cash crunch, the government had no choice but to do away with its more ambitious and futuristic plans. For instance the development of world class stations, which the government had been promising for over five years now, have vanished from the agenda. They have been replaced by a 'stations with modern amenities', a change that is symbolic of the rail minister's 'scaling down' approach.
Cash crunch
"You cannot announce new lines when nearly 90 per cent of the 125 new lines are not rendering adequate passenger revenue and 600 lines are 'economically unviable'. The tracks are not maintained properly, nor are there enough funds to overhaul them. Hence, the best policy is to go slow on these tracks to avoid accidents," said a top railway official.
Weighed down by the pressures of the state assembly elections this year and next year's mega electoral battle, the minister had to play the balancing act between austerity and populism. Due to the paucity of funds, Bansal could not match the sop sprees that characterised the tenures of his predecessors like Ram Vilas Paswan, Lalu Prasad and Mamata Banerjee.
Instead, the Budget presented by the Congress leader was stingy when it came to announcing new trains, lines, projects and factories for the party's political constituencies.
In contrast to Banerjee, who secured as many as 120 for her home state of West Bengal alone, Bansal could announce only 67 new trains in all. He also reduced the target for the construction of new lines by almost half for the current fiscal.
While Banerjee had proposed 114 socially desirable new lines, Bansal has mercifully limited himself to 22 projects of new lines, one gauge conversion for socio economic considerations and one doubling project.
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