COMMENTARY that have been thrown up in the course Indian Railways: o f the turnaround. Poor investment decisions or under- Has It Really Reformed? investments on the part of the railways in the past have been major constraining f actors in improving physical and thereby S Sriraman financial performance. But equally con- straining has been the suboptimal use A look at the interim budget of the ess than a decade back, there was a made of assets that have already been railways against the backdrop of widespread feeling that the railways built up. Rao and Sriraman (1985) the challenges thrown up in the Lhad entered a declining phase from o bserved this in the context of an attempt which it could be difficult to disentangle to understand the extent and nature of turnaround of the organisation, and get back on track once more. The disequilibrium prevailing on the Indian the building of an extensive Rakesh Mohan Committee Report pointed Railways in regard to the provision of network of freight corridors, this out very emphatically with a rider services. For a long time, supply pro- and the expansion of commuter that things could improve provided cer- cedures prevented fuller utilisation of tain hard decisions were made. Obviously, c apacity on the system. As a result, the transit services. from a political perspective, such deci- substantial surpluses required for expan- sions were not easy to take. As a result, the sion of facilities and services could not report and its recommendations appeared be generated. S riraman (2000; 2002) to have been kept in cold storage. No one, pointed this out more emphatically while at least in railway circles, talked about it trying to examine the revenue implica- since then. tions of a sub optimal utilisation of exist- ing capacity. Turnaround Strategy Fortunately, during the past decade, Given the arrival of Lalu Prasad on the attempts have been made by the railways scene of decision-making in 2004, it was to increase asset utilisation as a result of expected that the reforms suggested by which the tonnage lifted and thereby the the committee would be buried forever. revenues have gone up substantially, pro- The next five years saw the railways min- viding a basis for the expansion of the ister and his team devise a strategy which a sset base which is badly required in has brought about the (so-called) turn- c ertain parts of the system. Some non- around of the railways. Though a certain conventional thinking and a strong com- (a positive one too) direction has been mitment to follow the road less travelled given to the working of the railways, it has has made it possible to exploit the inher- not been realised (or rather recognised) ent economies of scale that were waiting that many of the elements involved in the to be tapped all these years. And this has process have been very much a part of the happened both in freight and passenger recommendations of studies stretching movement. All the railway budgets for the from the early 1980s to recent times. In past decade or so (more so after 2004) fact, a new publication penned by a civil have reflected a certain determination to servant, currently the minister’s most enable this to happen within the frame- trusted aide, claimed that the entire pro- work of the restructuring process that has cess served the political mandate well, quietly been undertaken during this wherein lay its success. It is easily recog- period (S riraman 2007; 2008). nised that good politics is based on good economics and vice versa, with each Bulk Movement Business r einforcing the other. How else can the The organisation has registered an excel- emphasis on the railways’ core business of lent performance in freight loading and transportation be interpreted? The interim earnings till September 2008, the growth railway budget for 2009-10 that was pre- rate being 10% more than that d uring the sented last week reflects the optimism corresponding period in 2007-08. The for- generated by such a focus, adopted during mation of a strategic business unit within S Sriraman ([email protected]) is the past five years. We look at the interim the organisation that deals exclusively with the Department of Economics, University budget in terms of the positive features with the crucial bulk movement business of Mumbai. that have emerged and also the challenges is reaping dividends and could soon be Economic & Political Weekly EPW march 7, 2009 vol xliv no 10 19 COMMENTARY expected to place the railways in a posi- minister rather than any attempt to draw reflected in the widespread dissatisfaction tion to be able to prevent more diversion some political mileage out of the move. It amongst the travelling public, especially to the roads if not as an aid to a reversal of would have been wise to confine even this on long distance movements. Mere availa- some movements to the railways. Though reduction to the lower classes since such bility of tickets through local area booths some shortfalls (in particular movements) reductions in higher class fares could lead or the internet is hardly the response to are expected during the rest of 2008-09 to a reduction in revenue given the nature the passengers’ requirements. There has due to recessionary trends, the overall sit- of demand for trips made in these classes. to be a paradigm shift in effectively pro- uation is likely to be only m arginally worse It is obvious now that there is only very viding a host of simple services to the com- off than expected with reasonable sur- limited competition between the railways mon passenger on trains. pluses being generated. However, it must and airlines. We have always maintained The budget announced action on a fea- be recognised that the days of higher that it would be useful to raise passenger sibility study to run bullet trains between growth rates in freight loading and move- fares at least marginally every year so that Delhi and Patna and such studies would ment (or even sustaining the current the cross-subsidisation burden on freight also be undertaken for other corridors movement) may soon be over in the movement decreases, and by offering between major cities. Some preliminary absence of additional effective capa city. It competitive rates on freight, the railways work done by various agencies has pro- is quite possible that the next two years or are able to control, if not stop, the move- vided some estimates. With these high- so may witness stagnation in freight load- ment towards road transport. But any speed corridors expected to be elevated ing. Internal sources suggest that the wear increase in passenger fares must be backed ones, the cost per kilometre of the infra- and tear in facilities is a lready high and up by an improvement in service quality. structure facility has been estimated to be pose major safety p roblems which officials Efforts towards this objective require a far Rs 500 crore. For instance, that would claim to ignore and even overlook. On the more systematic strategy (even when com- mean an expenditure of the order of other hand, they proudly record a signifi- pared with the strategy on freight move- Rs 1,00,000 crore for the corridor bet- cant improvement in safety in terms of the ments) with the necessary elements in ween Mumbai and Pune. While the declining number of railway accidents place to monitor service levels. Although, response to the proposal has been posi- during the past five years or so. Recession- railway budgets have continued to empha- tive, it appears that this is so without a ary trends are useful in such situations sise, year after year, the importance of real under standing of the implications of and enable organisations to build this quality of passenger services, efforts in these enormous plans. Zipping through badly required capacity, especially in this direction have been inadequate as the countryside at 300 kilometres an hour terms of the line and track capacity. The budget reflects continuing efforts that are being made to technologically upgrade the system in a number of dimen- sions. Superior types of wagons are being designed to raise rake capacity by nearly 80%. Modernisation of the network is also expected to raise sectional capacities by increasing speeds and permitting higher loads. The Dedicated Freight Corridors – on two of which work has already begun and can be expected to be in place in two years – could take care of seamless move- ment of freight in the absence of inter- ference from passenger movement. How- ever, apprehensions have been raised about these corridors relating to viability of these projects, especially when we take into account the fact that they may have to compete with existing corridors on the Golden Quadrilateral, provided, of course, the railways limit existing corridors to passenger movement. Passenger Services The across the board decrease in passen- ger fares to the extent of 2% seems to be more by way of a parting gift from the 20 march 7, 2009 vol xliv no 10 EPW Economic & Political Weekly COMMENTARY does seem an attractive and even a s ubstantial part of the total movement in require a more network extensive of dedi- r omantic proposition. They do it in Japan the case of bullet trains. cated freight corridors than the one that and in Europe, some devotees say, why has been proposed. Equally important is not in India so as to relieve airport and Need to Upgrade the need to expand the commuter transit highway congestion? From a social point of view, the railways services in the urban areas, besides, of The railways admit that they are not in are best suited for long distance move- course, providing for seamless movement a position to fund these projects fully.