Presenting the proposals for the railways within the ambit of the general Budget, the finance minister refrained from announcing any populist measures.
The FM also accepted that the railways were facing stiff competition from other modes of transportation and required transformative measures.
Why Indian Railway can’t perform?
Indian Railways failed to provide quality and timely service to passengers, has a poor record on safety and faces increasingly worsening finances.
It can’t perform better because it doesn’t invest and it can’t invest because it doesn’t raise tariffs, especially for passengers.
It was imperative to change the situation because the top 1% of the highest paying customers account for 30% of all railway revenues.
The railways cannot afford to lose these clients to airlines.
India has one of the lowest passenger fares in the world — the ratio of average passenger fare to the freight rate for India is 0.3 as compared to 1.2 in China and 1.3 in France.
Moreover, deceleration in earnings growth in both passenger and freight fares has meant that the operating ratio – has deteriorated from 90.5 per cent in 2015-16 to 94.9 per cent in 2016-17.
What are the measures that are announced?
In his Budget, the FM has tried to target each of these weaknesses, starting with finances and tariffs.
Tariffs would be fixed after taking into consideration costs, quality of service, social obligations and competition from other forms of transport.
An independent Rail Tariff Authority is expected to be in place in a few months.
Another significant change is the announcement of a Rashtriya Rail Sanraksha Kosh with a corpus of Rs 1 lakh crore.
This was one of the crucial and long-pending recommendations of the Anil Kakodkar-led high-level safety review committee in 2012. The fund will be used to improve safety preparedness and maintenance practices.
The other key directional shift is to nudge the railways to engage with the private sector, especially for finances.
Therefore the FM announced that three profit-making public sector undertakings under the railways would be listed on the stock exchange during the coming financial year.
Also a new Metro Rail Act would be brought in to facilitate greater private participation and investment in construction and operation.
But it should also beclear that the private sector will not commit unless the railways demonstrate their ability to improve functioning.
This, in turn, will test not only the government’s promise to allow fare increases but also the railways’ capability to become more efficient.
