Competitive edge to railways

Shivaji Sarkar
There is an urgent need to make Indian Railways more viable so that it can provide the nation’s economy a genuine surge. For this, the Government
has to spend more on improving railway services, like the way it has done for the road sector.
Should Indian Railways really opt for a fare hike? At times, it may be necessary, but raising fare and freight rates constantly, which is termed as ‘dynamic fare’, should normally be anathema. Another question that comes to one’s minds is: Is the railways really running in losses? Is it really giving subsidies? Or is it bad mathematics emanating from an improper budgeting system? The latter seems to be closer to reality. Some years ago, the railways came out with a heavy ‘surplus’ budget.
It paid a huge sum, in forex, to an American university, to project the then Railways Minister Lalu Prasad as a wizard. It turned out that the railways had fudged the accounts to create an ‘unusual surplus’. Then, is the railways running in losses? Possibly not. The answer to this is given by the railways itself in different ways. Through different budgets, it creates a syndrome of having a poor operating ratio, but that also is questionable. One fact emerges. The railways is not aware about its accounts. Except, possibly, accrual of fares and freight, Indian Railways is not accounting the expenses properly. The estimates of fare per kilometre and operating expenses are more in the realm of imagination.
So, the surge pricing introduced by the railways in premium trains like Rajdhani, Shatabdi, Duranto, is apparently utopian. It may earn the organisation some extra sum, but it also has the potential to lose the traffic to competitors – road and the air.
Agreed, it is a bureaucratic decision, but it has a heavy political cost that the ruling combine may have to bear. It will make the Government unpopular, particularly at a time when elections are due in some of the poorest States, including Uttar Pradesh. For a few bucks to be earned (or not), political parties often pay a heavy price. In any case, it will not improve either the
performance or functioning of the giant monolith.
For over a decade, the railways has come to support its inefficiency, stating that they are not running a service. It is a business.
If it is a business, the railways does not know how to manage it. It came up with euphoric statements to justify its inefficient functioning. One instance will suffice. A train, which has now been re-named as Anand Vihar T-Kolkata Express, takes around 40 hours to complete its journey of 1,400 km. Earlier, as Janata Express, it used to complete its journey in 30 to 36 hours. It has the same fare as any other express train. The train, despite its slow speed in reality, is running in profit, though travellers have to suffer a lot. There are many such trains across different zones.
Nowhere in the world is railways a business. Indian Railways needs to be viewed as a catalyst. Road or river cannot be by itself a business. These are catalysts to move forward the economy. They have the responsibility, particularly the railways, to make the Indian economy move at a higher growth rate – even more than the official target. It can peg it for 10 per cent for the next decade.
The railways should be seen like a social service. All the same, it has to run efficiently and create a competitive atmosphere. It cannot allow people to move to other modes. But if one has a choice between AC travel in Kolkata Express-type train and air, people would prefer air travel for obvious reasons. In many cases, air travel is cheaper and faster. Unfortunately, the railways runs on a bogey of social service, which in most cases it is not actually doing.
One of the members of the National Institution for Transforming India (Niti) Aayog, Bibek Debroy, who is also an economist, has come out with a unique report. He says that Indian Railways overstates its losses from social obligations by Rs6,000 crore every year – a huge amount. It means, over the last decade alone, it has overestimated its losses to Rs60,000 crore – an amount equal to various projects that were announced in budgets. It is a testimony how Indian Railways has been fooling the people of this country and misguiding the political leadership.
Debroy says, “Analysis shows that 20 per cent more losses in sleeper and non-AC are due to railways’ cost structure and not lower tariffs.” Simply translated, it means that the railways has been the most dishonest organisation.
The report indicates that the way the
railways computes its input costs is not reflective of the actual cost of per unit of service offered. The report states that inefficiency in cost structure also significantly contributes to the ‘losses’ in passenger services, and hence, tariff hike cannot be the only mechanism to address such social costs. Indian Railways, the report observes, stretches input costs to a point that it makes the ‘under-recovery’ due to ‘low’ tariffs look larger that they may actually be.
Debroy’s report states that the railways’ pricing of AC services is higher than an equivalent AC bus service and tariff hike cannot be the principle to address such ‘losses’. It also needs to be understood that the so-called subsidies are not paid by the exchequer or through budgetary support. It is stated to be done through a cross-subsidy of freight to passengers.
Railways freight is one of the highest only because of this cross subsidisation. As a result, poor people have to bear the brunt. It is an indirect taxation on the poor as essential commodities moved by Indian Railways, become expensive. This also makes India’s export products costlier and uncompetitive in the world market.
Early in the 1950s, Indian Railways was a bigger organisation, compared to its Chinese counterpart. Now, the latter has surpassed the Indian rail network in many ways.
Indian Railways used to carry 80 per cent of freight, while just 20 per cent of products used to go by road. It’s now just the opposite. It has happened because both Union and State Governments have spent or invested trillions of rupees for the development of roads. However, they have not spent enough on the railways sector.
The concept has to change. Railways has to run on lower fare and freight so that the economy can boom. There has to be a Government strategy for investing in railways, and in-turn, the accounting system has to be realistic and transparent, as Debroy suggests in his report.
All other ministries get grants, while railways earns every penny it spends. This must change. The approach of treating it as a commercial organisation should go. It has to be made competitive and viable to give the nation’s economy a real surge.

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