Railway Budget 2013-14: On Recovery Path: Civil Services Mentor Magazine May 2013

Union Railway Minister Pawan Kumar Bansal presented the Union Railway Budget for 2013-14 in Lok Sabha on 26 February 2013. Except for the fact that it was after 17 long years that a Congress minister got to present the Railway budget, there was nothing particularly unique about Pawan Kumar Bansal’s maiden essay. Having raised fares a little over a month ago, he was able to spare passengers this time, but he has put in place a dynamic tariff mechanism for freight to take care of future increases in the price of fuel. This is likely to result in a 5 per cent rise in freight rates from April 1, with the promise of a half-yearly fuel price adjustment system to provide for the regular hike in diesel prices announced earlier by the government.

The incremental loading of 40 million tonnes projected for 2013- 14 vis-à-vis the BE of 2012-13 is far below the projections arising out of the Vision 2020 document of nearly 100 million tonnes. This is an indication of how far the Railways have fallen behind their growth plans projected hardly three years ago. Food for thought at the highest level whether the Railways should lead or lag behind the overall economy’s growth rate. In this context, the Minster’s announcement that contracts covering 1500 km of the Dedicated Freight Corridors on the Eastern and Western sector will be awarded during 2013-14 is welcome news as the completion and commissioning of these two corridors is essential before the effects of the next Pay Commission deal a fatal blow to Railway finances around 2017-18.

The Minister’s announcement for Fuel Adjustment Component (FAC) linked revision of freight tariff, a proposal mooted by his predecessor, with effect from April 1, 2013 is welcome. His reluctance to bite the FAC bullet in the case of passenger fares is understandable, considering that a revision has been done recently. But hopefully this will not once again lead to a long hiatus of passenger fare revision citing various reasons. It is necessary to institutionalise the revision of freight tariff and fares through the proposed Rail Tariff Regulatory Authority. However, it is doubtful whether a final decision in this regard will be taken during the balance tenure of this government.

The January 22 passenger fare revision was meant to fetch the Indian Railways Rs. 6,600 crore in additional revenue in a full year; but the recent increase in diesel prices could cost the Railways Rs. 3,300 crore in its fuel bill. The logic of dynamic tariffs, even if only for freight, can therefore hardly be faulted. On the passenger fare front, though the basic fare has not increased, the minister has raised the reservation, tatkal , supplementary, cancellation and super fast train charges marginally. With the focus on making the Railways “financially sustainable,” Mr. Bansal is hoping to end 2013-14 with a balance of Rs. 12,506 crore in Railway funds. It is creditable that an operating ratio of 88.8 per cent is being achieved during the current year 2012-13, even after fully repaying the loan of Rs 3,000 crore along with interest that was taken from the Ministry of Finance, and after setting aside Rs. 9500 crore for Depreciation Reserve Fund (DRF). Against this, the budget estimate for 2013-14 projects an Operating Ratio (OR) of 87.8 per cent with a DRF appropriation of only Rs.7500 crore. This once again highlights the need for a more reliable index of financial performance rather than the present OR, which can be tweaked to suit by appropriately adjusting the DRF allocation. It is hoped that the proposed revamping of the accounting system will look into this aspect.