Biting the bullet

In an indication of tougher decisions to come, the BJP-led NDA government has acted to raise resources for the Indian Railways. Railway Minister D.V. Sadananda Gowda has announced a 14.2 per cent increase in passenger fares and 6.5 per cent rise in freight rates. These include a flat rate increase and a fuel adjustment component. Mr. Gowda had clearly indicated that a hefty increase was coming, and had sought to explain it away on the ground that he was only implementing a decision taken by the previous government on May 16 that had been put on hold. However savage this pre-budget increase may be, it was expected, sooner than later. The two hikes together are expected to fetch the Railways between Rs.7,000 crore and Rs.8,000 crore in a full year. It is estimated that the monthly loss to the Railways on account of passenger fares is about Rs.900 crore. As a result, the freight rates were subsidising or diverting profits to the passenger segment, and this was not sustainable. The increase was considered inevitable, but it can still be asked whether it should have come as a pre-budget announcement or could have waited for the Railway budget that will be presented to Parliament next month.

With the Indian Railways moving 20 million passengers a day, the subsidy burden was clearly hurting the system. For nearly a decade, successive Railway Ministers from alliance partners in the Congress-led UPA, found it convenient to deny the Railways any fare revision. Pawan Kumar Bansal of the Congress took charge in 2013 and effected the first increase, followed by a minor revision by Mallikarjun Kharge. Now, Mr. Gowda, and more so Prime Minister Narendra Modi, have decided to bite the bullet and mark up the fares substantially. The only concern is that the freight increase could contribute to inflationary pressures. It is a known fact that the Railways was finding it difficult to fund major infrastructure, safety, and other ongoing projects, given the financial constraints. Excessive market borrowing was creating another burden. Now that the new government wants to attract private and even foreign investment in infrastructure, including in the Railways, the financial viability of the system assumes importance. It is hoped that the Railways will now start investing in projects under implementation and in a major programme to shore up safety and security on the wheels. Given this round of fund-raising, the Railway Minister should make his first budget passenger, customer and investor friendly. The highest priority should be given to rail safety.

(The Hindu dt 23-6-2014)