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Comment on Railway Budget 2011-2012

Comment on Railway Budget 2011-2012

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Published by v_konduri1177
This is a comment on Indian Railway budget presented in Parliament on February 25th 2011 by Railway minister Mamata Banarjee
This is a comment on Indian Railway budget presented in Parliament on February 25th 2011 by Railway minister Mamata Banarjee

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Published by: v_konduri1177 on Mar 02, 2011
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Wednesday, March 2, 2011

Railway Budget 2011-12 – Journey to No Where – Veeraiah Konduri
Published in Indiacurrentaffair.org Minister for Railways, popularly known as MR in power corridors of Delhi is proceeding with UNimagined pace in order to ensure bankruptcy of historical Indian Railway (IR). This is once more evident from the budget presented to Lok Sabha on February 25th 2011. Apart from mismanaging the finances of Indian Railway, the current budget is charting the disastrous course of PPP as well as depending up on Capital markets to fund their infrastructural projects.

On the face of the detailed statement of accounts, it looks as if all is well. But once we digs deep, the skeletons tumbles out of IR coffins. As majority of the analysts commented, the Operating Ratio is an index to gauge the health of Railways. It is going down from 76 % in 2007-2008 Railway Year to 92 % in 2010-2011. This is after Railway board admits that during the last two months of current fiscal, they charged heavily to present a sober picture before the nation. If all depreciation is to be taken in to account, operating ratio will go up until Rs. 115. Means, Railways is spending Rs.115 to earn Rs.100, thus resulting in the net 15 % deficit in Railway budget. The cash reserve ratio is also not as good as it was released to the public. They achieved this cash reserve ratio also after depressing the accounts through lesser appropriation, lesser dividends. After all these mismanagement the Cash reserves goes down to Rs 1328 crores. Presume what would have been the actuals ! The more dangerous aspect is charting the PPP cart. Since last few years, Government is in the process of initiating projects with Public-Private Partnership under the guidance of Planning Commission. During the preparations to the current budget they achived the grand bargain it seems. Mamata Benerjee boasted herself in saying that Grass Budgetary Support to Railways will stood at 57,630 crores. But she did not informed the house of people that out of this proposed GBS, IR is intended to mobilize a huge, 35-40 %, which equals to 20,454 crores from Capital Market operations. Government is also considering the to issue tax free bond to the tune of another 10,000 crores thus leaving around 20,000 to be doled out from General Budget. Here lies the grand bargain. All the news papers flashed photos of Mamata Benerjee coming out of Janapath ( where UPA

Chairperson Sonia Gandhi resides) Race Course (the prime ministerial power hose) Planning commission offices before the budget. All the reports that were published informs us that she had gone to convince all those sitting at these places about her plans to dole out more to Bengal in view of upcoming assembly elections. If we ties the knots between the points and consider the speech by the Minister’s yesterday proves that the fact is otherwise. She visited all those places to reach out a policy compromise. It looks like the compromise is that she will present a railway budget to her liking with out asking for more financial backing from union government and in tern she has to allow the Railways to gradually shift its developmental strategy from government funded to market depended. This is the logical conclusion that one can reach after careful consideration of the developments. If this guess is proved right, then nothing will be more disastrous for Railways as well to the nation more than this. In this change of strategy the situation will be like this. As per the budget documents informs, IR is supposed to raise 20,454 crores from the Capital market, that means it has to divest the shares in Rail PSUs or resort to market borrowings. This will have cascading effect on the over all Capital market. As already the government rolling back the its stimulus as the growth rate is picking up. That implies tightening of credit market which RBI already resorting to in phased manner. Due to this the liquidity is drying up and private enterprises are complaining about the lack of required liquidity to fund their projects. At this if Railways competing for another 20,000 crores from Capital market means, the pressure on liquidity is invariably goes up which will lead to possible scaling up of interest rates with its spiraling effects on the economy. The other step involves in this, divesting the shares from Rail PSUs, which are earning considerable profits as per the Minister’s statement before the house, lead to gradual privatisation of Rail infrastructure in a phased manner. So far despite the country is effected by privatisaion spree over the last three decades, the Railway’s are unaffected by this except in an indirect way such as leasing out city side developments, running of railway canteens, in train services. Moreover, how can private capital come forward to fund an enterprise which is spending Rs. 115 to earn Rs.100, which is against the basic formulation of the business ? In that case, under the plea of no private capital is coming forward, the government is in all likelihood will move for cheaper pricing of its assets in the form of reducing the premium when it resorts to IPO. Already IPO market is a buzz with this likelihood. Here it is pertinent to make note of developments on London Transportation front. The London government, which allowed private capital to build the required infrastructure and maintain London trains, is rolling back after three decades of bitter experiences as it failed comprehensively to serve the nation under private management. At this point in time, the Indian government is looking for private capital to enhance the rail infrastructure in India. Another problem with this kind of involving private players in building rail infrastructure is also in front of us. During the last budget, the government announced 52 projects under PPP mode. Five years back, the much touted Delhi Mumbai Fright Corridor is also unveiled under in the same manner. As per the original target, DFC is supposed to be completed by 2011-2012 FY, where as we can’t find railway track laying for even a single kilometer under this project despite the fact of floating a special purpose vehicle. The Minister admitted in her budget speech that the IR is vetting and the proposals are undergoing the process of due diligence ! The actual reason is in both ways. Under the influence of on going global financial crisis, all the private players who came forward to become partners under PPP with Indian Railway delayed their decisions. Another important factor is that the IR does not have minimum fund to contribute its share under PPP for all these projects. Due to these two reasons, all the PPP projects are resting in the cupboards of Rail Nilayam, Delhi. Before considering new promises in Friday’s speech, let us consider the old promises. In the last budget, she announced that by 2020, India is going to build another 25,000 kilometer rail tracks a fresh and also proposed, as part of her grand Vision 2020 for Indian Railways, doubling of 12,000 KM lines, modernizing for another 14,000 Km lines, as well as converting the gauge for another

12,000 Km rail tracks ! Leave out the rest and consider the commitment for the new track of 25,000 Km by 2020. We are standing in 2011. Means another 9 years left. There is no assessment report before the parliament for its scrutiny what had happened since the announcement of Vision 2020. The minister also not took care of informing the House of People, what progress IR has achieved during the last two years since she became the minister for second term. All she could inform in the budget papers is that “ will be done”. There is not even a reference to the time line by which these projects will be completed, how much has already been earmarked, spent and what is the requirement. All these projects are differed to 12th plan period and she announced another grand scheme Prime Minister Rail Vikas Yojana. According to one assessments, so far there are 400 projects pending under Indian Railways. Some goes back to three decades also. At this stage she announced scores of new projects beginning with a diesel coach factory in Manipur to Bridge factory in Jammu & Kashmir. There is no dearth of new lines, new trains and extension of existing trains. All these will result in the over crowding the age old tracts which at majority of the places in dilapidated conditions due to non-maintenance at regular intervals. Regarding the staff though she announced that they will initiate recruitment process, no one knows how long it will take. There is no information about what all the new trains announced in the last budget and implemented till now for a comparative analysis. With this kind of carelessness, one can’t say any thing except that this is a journey to no where.

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