Railway Budget 2016: A valiant effort in adverse conditions

Every budget is a creature of the context in which it is made. Therefore, the Rail budget deserves to be commended for the valiant effort it makes to raise capacity and improve quality , boosting investment in the economy and tapping non-budgetary resources for the purpose. The Railways will lower its operational costs, set up three new dedicated freight corridors, reorganise the Railway Board for faster decision-making and set up a mechanism to set tariffs and adjudicate on disputes with licensees and private partners. Earning per passenger-kilometre has gone up 8.8% in the current year and is budgeted to rise by 12% next fiscal. Earning per tonne-kilometre of freight, in contrast, is slated to go up 1% next fiscal. This is a move in the right direction: for far too long, the Railways have cross-subsidised fares from freight hikes that have pushed cargo to road transport.

Even after retaining the benefit of falling fuels costs, the operating ratio, which measures how much of gross earnings are eaten up by working expenses, is a steep 90%. Weak demand from the core sector has hit earnings and only a huge cost saving has salvaged the situation. The picture is grim for the next fiscal -with operating ratio budgeted at 92% -due to huge payout on revised salaries and pensions. The Railways has discharged its dividend liability . The subsidy for dividend relief has been reduced, implying that the government is not is a position to be generous with the Railways. A drawdown from railway funds too is not a healthy sign. So, it is imperative for the Railways to raise more resources.

Financing capacity expansion through joint ventures with state governments and Indian and foreign companies is a sound move, as is tapping multilateral lending agencies and the Life Insurance Corporation. Revamping train stations, leveraging other railway land, fully tapping advertising potential and slashing costs of power procurement by buying power directly from generation companies will augment receipts. Plans to augment rolling stock and upgrade signalling are welcome.