What Rail Budget ’13 says about Budget ’13

Railway minister Pawan Kumar Bansal has put in place a dynamic pricing mechanism that will ensure a pass-through of increase in input prices such as fuel and electricity.
Live mint : Anil Padmanabhan : Tue, Feb 26 2013. 01 53 PM IST

There is cause for hope that the Union budget will focus more on vision than on atmospherics

New Delhi: If the railway budget is any indication, then there is cause for hope that the Union budget will focus more on vision than on atmospherics to grab voter eyeballs.

Railway minister Pawan Kumar Bansal has, in his debut budget, started where former rail minister Dinesh Trivedi left off—rather abruptly at that; he was ousted by his Trinamool Congress party boss Mamata Banerji—and put in place a dynamic pricing mechanism that will ensure a pass-through of increase in input prices such as fuel and electricity. At the same time, Bansal also signalled that Trivedi’s proposal to set up a Tariff Regulatory Authority was in the works and the subject of ongoing inter-ministerial deliberations.

While freight rates will immediately come under the purview of the dynamic pricing mechanism, passenger fares will be spared for now—a concession the minister extended in the light of the fact that fares were increased last month. The plan is to effect revisions twice a year. As in the case of fuel prices, this will work both ways—a drop in international fuel prices will entail a reduction in domestic prices.

Net-net, the rail budget is an excellent effort from Bansal; especially given the extenuating circumstances and the temptation of playing electoral politics.

If the government (and the Congress party) approach Budget 2013 in a similar way—and the finance minister’s actions and words over the past month give us no reason to believe it won’t—we could well see a progressive and reform-minded budget being presented on Thursday.

Railway budget links freight rates to fuel prices

In his railway budget speech, railway minister P.K. Bansal keeps passenger fares unchanged

Raginiverma :Amenmalik :Feb 26 2013

 Railway minister P.K. Bansal proposed that freight rates be linked to fuel prices in the railway budget that he unveiled in Parliament on Tuesday while keeping passenger fares unchanged.

The budget proposal will mean that freight rates change each time diesel and power prices are revised. This comes a year after former railway minister Dinesh Trivedi proposed a fuel-adjusted component in the formula for determining freight prices.

Against the backdrop of elections and slowing economic growth, “the minister has not presented a very pessimistic scenario,” said Rajeev Jyoti, chief executive of Larsen and Toubro Ltd’s railway business. “The bottom line to me is that he has presented a budget which looks optimistic. Yet he recognizes the challenges that the railways is facing at the moment.”

The minister is trying to to target freight to generate funds and linking the diesel price is an indication of that, he said. “He is unlikely to rationalize the passenger fares any further in near future. We do not expect that,” Jyoti said.

Bansal said that the proposal to set up an independent tariff regulatory authority, also proposed by Trivedi last year, will be taken up by an inter-ministerial panel.

“The minister is trying to cover a lot of areas. We are very happy about the financial discipline and financial stability that the minister has talked about. But we will have to wait and see how the whole thing comes up,” said Naresh Agarwal, chairman of the Confederation of Indian Industry (CII) railway equipment division and managing director of VAE VKN Industries Pvt. Ltd.

The minister held back from any increase in basic passenger fares over and above that was effected on 22 January. He, however, proposed increasing service charges applicable on passenger ticketing, prompting protests from some members of the house. Bansal said that railways will raise Rs.483 crore from the revision in various service charges.

The railways has managed to significantly improve its operating ratio to 88.8% in 2012-13 from 95% a year earlier. For the next fiscal, Bansal has targeted a further improvement to 87.5%.

Although the railways will miss this year’s revenue targets both from the freight and passenger segments, Bansal said he has budgeted for Rs.93,400 crore by way of freight earnings and Rs.42,200 crore from passenger ticket sales. This year the railways is expected to earn nearly Rs.86,000 crore from freight andRs.32,500 crore from the passenger segment.

Bansal has budgeted for an annual plan outlay of a little over Rs.63,300 crore in 2013-14, out of whichRs.26,000 crore will come from the finance ministry as gross budgetary support. Bansal has proposed to raise around Rs.15,000 crore from the market and around Rs.14,200 crore from internal accruals.

The minister also proposed to set up a new debt service fund to repay loans and interest owed to funding institutions such as the World Bank and the Japan International Cooperation Agency, for whichRs.4,163 crore has been allocated in the coming fiscal.

“Creating the debt service fund is very important,” L&T’s Jyoti said. “He is in favour of having funds that will enhance the overall health of the railways.”

The railways has budgeted a relatively healthy Rs.7,200 crore towards the depreciation reserve fund, which is used for maintaining rolling stock. A little more than Rs.5,400 crore has been allocated to the capital fund, while Rs.22,000 crore has been allocated to the transporters’ pension fund. The development fund gets Rs.3,500 crore.

Bansal estimated that total gross traffic receipts in the coming year will stand at Rs.14,3742 crore.

A lament for Indian railways

Sundeepkhanna:Feb 26,2013:3.04pm

India’s 160-year-old rail network needs a bold leap forward, not an accountant’s budget

The piecemeal changes announced by railway minister Pawan Bansal in the Railway Budget are symptomatic of the scurviness with which successive governments have treated this vital piece of transportation. Indeed, if you ever need to see the much-flogged difference between India and Bharat you don’t need to travel to a remote Indian district. It is visible in the heart of any of our major metros staring at you in the form of the contrast between the swank roads leading up to the gold-plated Indira Gandhi international airport in the capital as opposed to the grubby, congested and underwhelming mess that leads up to the Old Delhi station.

The new airports in Delhi and Mumbai were built in record time to accommodate the anticipated increase in the number of fliers. The Old Delhi station built in 1903 on the other hand hasn’t undergone any major expansion in the intervening years. There is clearly a perverted snobbery in this step-motherly treatment of the railways.

Instead of putting the railways on the backburner with minimal additional investments in enhancing the quality and the span of its network, we need to celebrate its utility in the Indian context. The railways changed the way we live. The coming of the railways didn’t just put wheels on people’s feet. When you think of the vastness of the India of the 19th century, the railways meant that ideas and knowledge could grow from local to national.

Beginning its journey in 1853, the railway network reaches over 7,500 stations, carrying nearly 25 million passengers daily (over 900 crore on an annual basis). By contrast, all the airlines together flew 5.88 crore passengers last year, down from 6.06 crore in the previous year.

Of course the railways lose money – Rs 24,000 crore in fact, as the minister reminded us in his speech. But to put that in perspective, almost all of India’s airlines are deep in the red with accumulated losses over the last five years of more than $6 billion. Kingfisher alone has losses of nearly Rs 2,159 crore for the last nine months.

And yet, while the airline sector is a priority, and policies are being constantly tweaked to ensure choices and comfort for fliers, the rail passenger is a pariah. Just travel on any of the long-distance ordinary trains where people are herded like cattle in unsanitary compartments to fathom the full nightmare of the rail passenger.

Once upon a time, the very architecture of the railways, meant to bridge distant destinations, also ended up reducing the strangeness of places thousands of miles apart. Milan’s gigantic Stazione Centrale doesn’t seem particularly alien to a first-timer from India who has done a few trips to the very similar Chhatrapati Shivaji Terminus in Mumbai. Yet, in terms of ease, comfort, speed and charm of travel, the two rail networks are now light years apart. It is another enviable legacy we have squandered with impunity.