Indian Railways are a kind of Department of the Government of India with lot of Independence in operation and Manning and not ruled completely by Indian Administrative Service personnel. One major reason for this seems to be that Railway Operations are too technically as well as administratively complicated for the IAS people to handle and require technically qualified/ trained personnel dedicated to Railways for years together. This is one reason also as to why the Indian Railways have remained much more efficient and properly governed with accountability than the usual government departments. However, they still have to suffer the whims of the politicians in the form of the Union Minister of Railways and his/ her deputy ministers or ministers of state. Railways are big empire and deploy the largest number of employees of a single employer in the country.
The Railway presents every year a Budget of its own for approval of the Parliament. The Railway Budget for 2011-12 was presented by the Railway Minister on February 25 to the Parliament: this was her third consecutive and probably her fifth Railway Budget in her career as a Minister.
Undoubtedly, the Railway Budget has significant economic implications for the country. So, people are generally interested in what the Railway Budget means for them - the common commuters, poor passengers, the industries which depend on transport of raw materials, machines and finished goods on the wheels of the Railways. How did the Railway Budget for 2011-12 fare.
Marvelously well. There has been no hike in passenger fares and freight tariff rates. Even the Prime Minister applauded the Rail Budget because he felt that the with the Rail fares and freight rates kept on hold at the same level, it would be helpful to the Government to control the sharp cost-push price inflation the economy has been experiencing for quite some time. Mamata Bannerjee on her part remained popular Minister having kept the fares and rates constant for the third successive year during which the average inflation rate has been close to 8%. She had been accused of being populist and not taking care to raise resources through higher surplus generation by raising fares and freight rates last year. The economists and policy makers have difficulty now of criticizing her as her decision is anti-inflationary at a time when the Government is being criticized for not being able to curb high rates of inflation. Mamata played an Ace of simultaneously being popular and consistent with demand for actions that are not contributing to inflationary price spiral.
But she is still accused of being responsible for deterioration in the health of the Railway finances. How have Mamata and the Railways perform on the financial front. The analysts and critiques have difficult to understand how this miracle had been possible. Mamata reports that after adjusting for "pay commission arrears into consideration, which rightfully are liabilities of previous financial years, the operating ratio would have been 84% even with payment of higher salaries and pension", which is a 7 % point reduction in the ratio of expenses to income of the railways, and that if the salaries (which increased by about 97% due to the Pay Commission recommendations) and pension were "also kept at the earlier levels, the operating ratio comes down even further to 74.1%". Thus, the Railways generated a much larger surplus than they were expected: only a greater part of the Surplus has gone to pay arrears of previous years. Even after meeting the arrear liabilities of the previous years, the Railways have paid full dividend at the 6% prudent rate.
How was this possible? Mamata reports loss of earnings due to disruption of train movements of about Rs.1,500 cr and another Rs. 2,000 cr due to the ban on export of iron ore. Yet, her revised estimates show goods earnings at the budgeted given the trend in level higher yield per NTKM. The total gross earnings are revised at Rs. 94,742 cr which is Rs. 177 cr higher than the budget. "On the expenditure side, two hikes in the rates of HSD oil and increased electricity tariff in some states, higher DA rates and excise duty rates, as well as impact of unanticipated higher salary and allowances, raised the requirement by Rs 5,700 cr." But she proudly declared that the Railways I am proud to say the railways effected a saving of Rs 3,700 cr through economy drive and other austerity measures. She places revised estimate of Rs 40,315 cr.f plan expenditure for the year ending March 2011. Her big expansion in number of trains seems to be paying off in terms of generating revenues. More trains mean more contribution with fixed costs virtually remaining the same.
In the TV debates over Mamata's performance, articulate politicians accused the Railways of making losses and getting into a financial mess!!! It is because of high level of financial illiteracy among otherwise articulate and logically inclined politicians, the common people tend to get confused.
She is going to borrow heavily and create further mess in the forthcoming Budget year 2011-12, allege her critics. Let us see how? The Gross Traffic Receipts for 2011-12 are budgeted at Rs.1,06,239 cr (for the first time, railways’ earnings are set to exceed the
Rupees one lakh crore) recording a rise of 6.5 % or so. With ordinary Working Expenses assessed at Rs73,650 cr., an increase of 9.9% over Revised Estimates of
2010-11, appropriations to Pension Fund at Rs15,800 cr and to Depreciation Reserve Fund at Rs.7,000 cr compared to Rs.5,700 cr in the Revised Estimates, and a provision of Rs. 6,735 cr has been made for dividend payment, will leave an “Excess” of Rs. 5,258 cr to be utilized for Development Fund and Capital Fund. The Operating Ratio is projected to fall back to 91.1%, thus restoring the railways to stronger financial health, leaving behind the large adverse impact of the Pay Commission.
This improvement will enable the Railways to embark of increased outlays on planned capital development expenditure. Mamata proposes an Annual Plan, 2011-12 for spending Rs.57,630 cr. - the highest ever plan investment by the railways in a single year, to be financed through General Budgetary Support of Rs. 20,000 cr, diesel cess of Rs.1041 cr, internal resources of Rs.14,219 cr, market borrowings of Rs. 20,594 cr through Indian Railway Finance Corporation, which raises between Rs. 9,000-10,000 cr annually for leasing of rolling stock. Thus an additional amount of `10,000 cr will be raised through tax free bonds for financing select capacity enhancement works. Further, external source of financing through PPP, WIS etc is expected to yield Rs.1,776 cr. A greater thrust is being given to the expansion of the rail network with a larger allocation of Rs. 9,583 cr for new lines. "It is planned to complete 1,000 km of new lines in 2011-12. In addition, the left over new lines from last year’s target will also be completed." Besides,Rs.5,406 cr and `2,470 cr will be spent on doubling tracks and gauge conversion projects to complete 867 km and 1,017 km respectively. Rs. 13,820 cr has been earmarked for acquisition of rolling stock.
Doubts have been expressed about Mamata’s actual achievement in relation to her ambitious target announcements. The Railways have set a new record of achieving ambitious targets. Of the 251 updating surveys/new surveys for new lines/gauge conversion/doubling identified by her in two successive budgets, 190 surveys will have been completed by March 2011. She promised up gradation of 584 stations as Adarsh Stations, of which 442 stations will have been completed by March 2011 and the rest in 2011-12. Against the target of covering 33 new line sections of 1,021 km identified for completion and less to less than 200 km average of new lines for the Railways in 2010-11. Besides, 27 new line section projects will have been completed by March 2011 and Railways are confident of achieving 1,000 km of new lines in 2011-12. The targets of 800 km for 15 sections of Gauge Conversion and 52 sections for doubling 700kms would be achieved in 2010-11. 42 new lines sections covering 1,075 km proposed to be completed and 35 sections covering 867 km are proposed to be doubled in 2011-12. She has announced new trains for 2011-12, 10 Rajya Rani Expresses, 56 Express trains, 123 passenger trains, 22 Demu and eight Memu, extension of 33 existing trains, increase in frequency of 17 trains and completion of Surveys for 107 new lines, 4 Gauge conversion lines, 15 sections for doubling and1000 km for electrification in 2011-12.
The critics of Mamata Bannerjee got disapponited that she left very little scope for them to attack her in the Parliament or on electronic media.
