26Feb

Rail Budget 2015-16 India Update : Passenger svcs breakeven must, says ex-rail board member

The best start for the railway reform will be if the present railway minister can make passenger services of Indian railways breakeven. The Indian railways’ finances has gone from bad to worse gradually for the simple reason that Indian railways had to cross subsidize its passenger sector earnings by about Rs 30,000 crore every year.

Over the years, it is increasing. During my time, the loss of Indian railways due to passenger services was Rs 8,000 crore. After taking a lot of measures, I could reduce it to Rs 6,000 crore but now since then and prior to my time also, passenger fares were not increased and very recently two-three small increases have been made. As a result, what has happened is loss has increased right up to Rs 30,000 crore.

If you calculate the operating ratio of passenger services separately as you know that Indian railway’s overall operating ratio is little more than 90 maybe 92-93 and gradually it is getting worse. Now, if you separately calculate the operating ratio for passenger services and freight services then passenger services operating ratio will be as high as 160, which means for earning each Re 1 from passenger services, you have to spend Rs 1.60 paisa.

Normal course – Indian railway is the only railway in the whole world, which makes a small amount of profit but if you can make the passenger services self sufficient that means breakeven then Indian railway can easily generate internal resource mobilisation to the tune of Rs 40,000-45,000 crore.

The railway is a commercial organisation basically; therefore railways operation broadly should be divided into two categories. First category 80 percent of it should be on commercial configuration, commercial viability. That should be only if the operation, the business is financially viable. Now therefore all commercially viable projects like any other commercial organisation be it PSU or a private corporation it has to be financed following the normal principle of financing a project. That means 30 percent by the organisation through equity or their internal generation and 70 percent by credit, bank loan. If they can earn Rs 40,000-45,000 crore profit, every year it will not be difficult for them to finance those projects and according to me Indian Railways can finance any project.

Balance, about 15-20 percent these are those projects where say in a backward area the rail line should go, the roads have gone because every year thousands of crore either central government or state government have spend for expanding the road network. Like, during Vajpayee’s time the golden quadrilateral of roads have been constructed or started being constructed.

So railway has got 2-3 social obligations, not exactly the social obligations, it is necessary for the country’s benefit, security and defence. So front area, backward area, these projects entirely should be financed by the state government or the central government. If a state wants some line in their backward area they should pay some 50 percent or whatever it is and Center should pay and that project should be constructed based on that.

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