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Fare, freight hike will help boost Railways' fiscal status

Tara Shankar Sahay in New Delhi

Prime Minister Atal Bihari Vajpayee's warning that the post-Bhuj earthquake period warrants a hike in railway passenger fare and freight is likely to partially restore financial stability to the cash-strapped railway ministry, according to a senior director in the Ministry of Railways.

"Indian Railways has been facing an acute resource crunch since 1985-86. The Railway Finance Commission, so far, has borrowed Rs 180 billion till the current financial year. Besides, the Railways have to pay a 7 per cent dividend -- Rs 16 billion -- but it has been deferred by a year. Since last year there was no hike in the railway budget, the Bhuj earthquake has made it imperative on the government to actively consider raising passenger fare and freight," the senior railway ministry official stated.

He pointed out that the railway dividend amount -- Rs 8 billion -- was still with the ministry.

However, this surplus money would be wiped out since the high-speed diesel, whose price had been increased twice in the recent past, was proving to be a costly but indispensable fuel for the railways, he contended.

A bright spot for the railways in this context was that the surge of traffic switchover from the roadways to the railways (truck operators find it cheaper and more convenient to transport goods by train) following the increase in the price of high-speed diesel.

However, the railways spent nearly Rs 29 billion for purchasing high-speed diesel and "this left a big hole in its pocket," the official pointed out.

Contending that the railways revenue was generated through internally through fare and freight, budgetary support from the general exchequer and raising resources through the capital market (Railway Finance Commission), he said the Rs 180-billion debt had proved to be a major stumbling block.

"The prime minister is quite aware that unless the railways' financial position improves, posterity will be drowned in the debt trap," he asserted.

Referring to the havoc wrought by the Bhuj earthquake to the railway infrastructure in Gujarat including the replacement and repair of various bridges, he said the latest estimate indicated that at least Rs 10 billion would be required to 'resuscitate' it.

"This is just an estimate, the final scenario might entail an upward revision of this figure," the official warned.

"You can now appreciate why the prime minister took the initiative in announcing the likelihood of a hike in the railway budget," he pointed out.

He contended that the Union Cabinet (which is meeting late this evening to discuss the fallout of the Bhuj earthquake) had also been discussing proposals about the possibility of bringing in ordinance for "instilling more life" into the railway infrastructure in the wake of the earthquake, he said.

Whether the Union Cabinet would bring in the ordinance in Parliament's inter-session period or whether it waited for the railway budget to effect the hike in passenger fare and freight was something to be seen, the official added.

Significantly, the prime minister's announcement about the likelihood of increase in passenger fare and freight hike seems to have rattled railway minister Mamata Banerjee who is rushing to Delhi from Calcutta this evening.

Mamata had earlier indicated that she was inclined to effect no hike in the railway budget. Although she did not cite any reason, observers opine that it is apparently to please her parliamentary constituency in West Bengal.

The Complete Coverage | List of earthquake sites

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