It is a given. Depending on where you sit in Parliament, your reaction to what the government says and does is governed by it. So those who rushed to dub the maiden Railway Budget of the Modi Government as elitist and pro-business ought to be taken with more than a pinch of salt. They have to say what they have to say. But more important is the reaction of the experts and other stakeholders in the vast railway network. Happily, the response of the experts is by and large positive. Given that the fares and freight rates were raised by Railway Minister Sadananda Gowda a few days ago, there was no change in these in the budget on Tuesday. Instead, the ever-smiling minister used the opportunity of the Budget to take stock of the financial state of the biggest employer in the country, with more than 1.3 million people on its payroll. To say that the rail finances are in a mess will be an understatement. An operating ratio of 94 per cent — which means that for every rupee it earns, it has to spend 94 paise on its day-to-day running — clearly is not adequate either to modernise or to improve the safety and security of the rail system. Even after raising the fares and freight rates, the railways still drop money in running passenger services. In fact, because it cross-subsidises passenger traffic through higher freight rates, the growth in freight haulage has lagged behind. In fact, passenger trains leave little scope for it to expand its freight-carrying capacity further. The upshot is that the railways have been losing freight business to road transport, especially when freight charges are no longer attractive. In this regard, the on-going project for dedicated freight corridors could prove most helpful, but, again, that would take some years to fructify into reality. In the meanwhile, Gowda’s emphasis on consolidating rail finances through injection of new technology and partnership with private parties in improving and expanding the rail services is welcome. Admittedly, various corruption scams and the crony capitalism of the UPA decade had made the PPP model notorious. However, if implemented honestly and efficiently, the PPP model can be a blessing, especially in the current scenario, when the public exchequer is deeply constrained to raise funds for essential housekeeping tasks, leave alone launching new projects. Gowda has also taken a bold initiative in opening up the railways to FDI, barring the operational part of its systems. FDI up to 49 per cent in non-operational areas signals a willingness to upgrade the railway network and to make it economically viable. Ideally, railways should operate on a cost-plus basis, but given the political compulsions, it inevitably ends up subsidising a number of services, especially most passenger traffic. It is a myth that the poor gain from such subsidies. They do not. For, subsidies pressure the fisc, which in turn pressures the general priceline. Inflation, as Ronald Reagan once said, is a hidden tax on the poor. Therefore, paying for services availed ought to be the norm for everyone, unless the really needy can be singled out for concessional treatment. Notably, Gowda did not wisely follow his predecessors in announcing a slew of new trains and projects, something which invariably attracted the intermittent applause from the MPs. As he noted, a majority of such projects, announced with great fanfare were forgotten the moment the budget speech was over.
Of the 99 new lines announced in the UPA years, only one was near completion. Even the rail projects announced for the VVIP constituencies of Rae Bareli and Amethi by the UPA rail ministers to curry favour with the Gandhis largely remained on paper. The point is that a dose of realism in the Gowda budget is not something to be sniffed at. Papering over the poor state of the railways’ finances would have only earned him cheap kudos, but would not have helped in streamlining its operations. Safety and security of passengers being a first priority, the rail minister has done well to stress these along with cleanliness of the stations. But his challenge also lies in associating the private sector in upgrading the rail services. For the railways, in a way, mirror the state of the country at a most personal level to both domestic and foreign travellers. That rotten impression of the railways must change. Gowda has taken the first step in that direction.