Issues:
1. Severe capacity and resource constraints due to –
a. Deeply discounted passenger rail fares,
b. Under investment in railways,
c. Expenditure on railways as a share of transport expenditure has fallen from 56% in 7th plan to 30% in 11th plan.
2. Confusion between social and commercial objectives(equity vs efficiency) –
a. Connectivity to remote un-remunerative locations.
b. Subsidizing passenger services.
c. Transportation of essential commodities at below cost.
d. It has led to –
i. Uneconomic capacity expansion
ii. Loss of focus in project execution as many projects have been initiated rather than concentrating on easing capacity constraint or improving operations.
iii. Poor cost management as resources are spread thinly over too many projects- time and cost overrun.
3. Organisational dysfunction –
a. Productivity level is far below international benchmarks.
b. Each department under railways is staffed by separate cadres. It has undermined strategic coherence and led to internecine battle for resources.
Reforms:
1. Setting of an independent regularity authority to fix and rationalise the fares.
2. Reforming accounting system to enable better business decisions and improve financial discipline.
3. Learning from the experience of dedicated freight corridor, Railways should adopt a programmatic, rather than a project-specific, approach to investment planning.
a. It would enable planning in an integrated way as part of strategic programme.
b. The announcement of programme would draw many subsidiary industries.
c. It would help reduce politically motivated projects.
4. Mobilize resources from the private sector, through PPPs and through partnership to monetize its land bank.
5. Railways should also explore freeing up resources by shedding its non core activities such as its rolling stock manufacturing operations.
Merger of Rail Budget with Union Budget:
The union cabinet has given approval for the merging of rail budget with union budget. The decision has been taken on the recommendation of a NITI Aayog committee headed by Bibek Debroy.
This merger does not require any constitutional or legal backing. It can be done by a cabinet decision.
Facts :
On the basis of the report of the Acworth Committee, railway finances (those of government-owned railway companies) were separated from the general finances in 1921. First Railway Budget was presented in 1924.
India has around 66,000 km of railway lines, of which only around 17,000 km have been added since Independence.China had just 22,161 km in 1950. Today it has over 1 lakh km.
Our Shatabadis and Rajdhanis and even the latest Gatiman Express run at a maximum speed of 160 kmph. China has already achieved a speed of 300 kmph with the Beijing-Guangzhou bullet train service.
Indian railway carries around 23 million population daily, almost equal to entire population of Australia.
Indian Railway is one of the world’s largest employers in the world, staffing over 1.4 million people.
Reasons & Advantages:
1. Railway budget has become a political tool to announce populist measures like new trains, projects, and highly subsidized passenger fare irrespective of its viability.
2. It would financially empower the Railways as –
It won’t have to pay the annual dividend on gross budgetary supports (provided by the government).
The burden of Railway’s revenue deficit would be passed on to finance ministry.
It would help the Railways to raise extra capital expenditure.
3. The delay in completion of projects and the cost overruns would be addressed.
4. A lot of resources are wasted in the process which would be curbed after the merger.
5. It would help in reducing the procedural requirements and thus more focus would be given to policy related issues.
6. It will enable formulation of a seamless national transportation policy.
7. This merger is also a part of the government advancing the budgetary exercise so as to complete it before March 31 and facilitate the beginning of expenditure on public-funded schemes from April 1.
Challenges and Concerns:
1. Railway Ministry’s autonomy might suffer after the merger.
2. The merger would make the Railways just another government department; it may lose its commercial character.
3. Scrapping of the Rail Budget may result into more ad hoc approach in its handling.
4. Railways require swift handling and action, in terms of technology adoption, safety issues etc, and merger may not allow it to do so.
5. It may also slowdown the privatisation plan which is one of the due reforms in Railways.
Conclusion:
Railway is losing high-end traffic to air and low-end passenger traffic to roads. Reforms like restructuring of railway board, accounting reform and setting up of a regulator are needed to cater to the challenges. The merger of Rail Budget with that of Union Budget is the first step in that direction.
References:
1. Understanding the economics of budget merger, The Hindu
2. Railway budget, a vanishing trick by K Balakesari, The Hindu
3. Why we don’t need a Rail budget, Livemint
4. Ministry of Railways official website
5. Big bang reforms in railways, ToI’s interview of Railway Minister Suresh Prabhu
This Article is a part of ForumIAS Mains 2016 Initiative. For a list of all articles that will be published on ForumIAS Portal for Mains visit https://forumias.com/portal/mains2016
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