Railway Budget 2012-13: A Modest Revision In Rail Fares, In Almost A Decade, To Reduce Working Losses

By S. Sethuraman
The Railway Minister Mr Dinesh Trivedi, in his maiden budget for railways in 2012/13 presented to Lok Sabha on Wednesday, holds out plans of greater safety for passengers and modernization of the largest undertaking in the 12th plan period with a modest revision of fares for all classes of travel at the rate of two to thirty paise per km for specified minimum distances.
Whatever be its additional revenue potential, which should be significant, it is the first fare revision for the second class passengers in almost a decade which has seen railway finances deteriorating from year to year. The Minister said that the revision would have “minimal impact on the common man and keep the burden within tolerance limits in general.
In a pre-budget move, the Railways had effected an across-the-board hike in freight designed to ensure an additional yield of not less than Rs. 20,000 crores. In one of the longest budget speeches, Mr Trivedi was at great pains to emphasise that the railways would gear themselves upto not only providing safe travel along with handling larger volumes of freight traffic but also fulfil their obligations to tap extra resources to bring down their operating ratio to sustainable levels over the medium term.
Mr Trivedi said his Ministry would follow up what two high-powered committees on safety and modernization (headed by Dr Anil Kakodkar and Mr Sam Pitroda respectively) and implement their recommendations during the 12th plan (2012-17) with investment proposed at Rs. 7.35 lakh crore for which gross budgetary support would be Rs. 2.5 lakh crore. Railways expect to generate internal resources of the order of about Rs. 200,000 crores.
He said the proposed adjustments in fares would not cover even fully the impact of increase in fuel prices during the last eight years. But he gave notice of railways linking future rise in fuel costs with fares as a fuel adjustment component and said that in the event of any further increase in input costs during the year, it would not be possible for railways to keep the passengers cushioned from the impact of such increases.
Mr Trivedi has for the present deferred the proposal of the Kakodkar Committee for a safety cess collection from passengers. Both reports on safety and modernization would be studied further and action taken in a time-bound and need-based manner. Too begin with, his ministry has decided to start work on the elimination of all unmanned level crossings within the next five years. He announced setting up of corporations on logistics and remodeling of stations as well as an independent railway safety authority as a regulatory body.
Indian Railways’ investment in the 12th Plan period would keep in view the recommendations of the two committees he had set up. The 12th plan investment proposed by Railways at Rs. 7.35 lakh crore represents a quantum jump over the investment during XI Plan of Rs. 1.92 lakh crore. The required resources for the plan would be met through gross budgetary support of Rs. 2.5 lakh crore, government support for national projects of Rs. 30,000 crores, by ploughing back of dividends, internal resource generation of the order of Rs. 200,000 crores and extra-budgetary resources including institutional and market borrowings at a level of over Rs. 218,000 crores.
The Railways would focus on safety, consolidation, decongestion and capacity augmentation, modernization and bringing down the operating ratio (OR) from 95% to 84.9% in 2012-13 and to 74% in the terminal year of 12th Plan which, he said, would be an improvement over the best ever achieved by Indian Railways. Since 2000, the OR had stayed above 93 to 95 per cent most of the years, despite the growth in revenue-earning freight traffic while these earnings were used to cross-subsidise relatively low fares. None of the railways ministers touched the lower class travel fares in this period.
Mr Trivedi of the Trinamool Congress has drawn inspiration in framing his budget from his leader Ms. Mamata Banerjee, West Bengal Chief Minister, who presented the first three railway budgets of UPA-II, though he has apparently managed to secure the approval of his leader in making a departure on fare revision in a situation of the railways faced with the prospect of expenditure outrunning net revenues, further worsening the financial health of railways and depriving resources for essential replacements and renewals.
Also, the Minister has agreed with the long-held view of expert committees that the present structure of the railways must be altered to meet the challenges of changing times and the Railway Board restructured along business lines rather than on functional lines corresponding to corporate objectives. There is also a need to infuse larger accountability and the structure aligned with organisational objectives. “We need a system that delivers. The issue needs to be debated and discussed with Board and Rail Parivar of 14 lakh workers” he said.
Mr Trivedi announced a long list of new lines and trains, as is normal in railway budgets, maintaining that he has tried to meet the aspirations of people as far as possible, plans for gauge conversion, electrification and introduction of modern signaling devices.
On the scale of operations envisaged for the coming year, he said, railways are targeting to carry 1025 million tonne of revenue earning originating traffic during 2012-13, which is 55 million tonnes more than the revised estimate target of 970 million tonne. The freight earnings target has been kept at ‘89,339 crore, indicating a growth of30.2% over the current year revised target. Passenger growth is assumed at 5.4 per cent with the increase in number of trains and higher occupancy. The passenger earnings have been kept at ‘Rs. 36,073 crore, an increase of Rs. 7,273 crore over the revised estimates of the current year.
Gross traffic receipts are expected to be Rs. 1,32,552 crore, i.e. an increase of Rs. 28,635 crore over the Revised Estimates of 2011-12. The Budget has provided for higher working expenses to meet additional liabilities alongwith an appropriation of Rs. 18,500 crore to Pension Fund. In order to step up investments in safety, the Appropriation to Depreciation enhanced to rs.9,500 crore, signifying an increase of about 54% over the RE of the current year. The railways have budgeted to discharge full dividend liability of Rs. 6,676 crore to the general exchequer for the year 2012-13. Railways would also repay the loan of Rs. 3000 crores provided by the Finance Minster for safety-related investments during the year.
Mr Trivedi also assured the Lok Sabha he would endeavour to bring down the operating ratio from 95% to less than 80% by the end of 12th Plan. This “landmark improvement in railway finances would enable building up of a strong base to meet the challenges ahead and bring back the confidence of people in Railways, thereby dispelling all apprehensions that Indian Railways is going downhill.”. He expects OR of 84.9 per cent in 2012/13 as compared to 95% in the current year. (IPA Service)