Debating India


On the popular track

Friday 30 July 2004, by MURALIDHARAN*Sukumar

Laloo Prasad Yadav presents a Railway Budget that reflects his core concerns as a politician who has not lost touch with his roots.

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Railway Minister Laloo Prasad Yadav outside the Parliament House after presenting the Railway Budget.

LALOO PRASAD YADAV is an extraordinarily engaging political figure who came to the Ministry of Railways seemingly determined to transform its basic ethos. That he would oppose any proposal to raise freight rates and fares was evident. And as his Railway Budget proposals were rolled out on July 5, it became clear that he had been entirely successful in sticking to this resolve. But did he really achieve anything beyond this? The decades-old organisational behemoth of the Indian Railways is not easily amenable to radical change. Ardent votaries of tranformative politics have been known to scale back their ambitions once ensconced in the most privileged recesses of Delhi’s Rail Bhavan.

Yet Laloo Prasad is not one to forget easily his basic instincts. In the course of one of the longest Railway Budget speeches in recent times, he made two specific announcements of benefit to the community of railway porters. Railway stations will be granted funds to build shelters for licensed porters to spend their few hours of leisure. And spouses will now be entitled to a biennial privilege earlier reserved for registered porters in the Indian Railways: a free return ticket to any destination in India.

Benefits were not confined to the symbolic or the cosmetic. Laloo Prasad evidently has in mind an entire scheme of social security for the unorganised sector. In emulation of a programme that has been introduced on a pilot basis in about 50 districts, the Minister has announced that all workers in the unorganised sector who come in contact with the Railways, would be covered under the scheme. Where licensed porters are concerned, the initial financial contributions for the scheme would be provided through the Railway Budget. The vast majority of the unorganised workers who come in contact with the Railways however, are in turn employed by contractors engaged by the Railways. In these cases, the Minister proposes to initiate a dialogue with the Law and Labour Ministries to enact the kind of legislation that would put the onus for the schemes on the contractors concerned.

It has of course been many years since a Minister presenting a Railway Budget made any mention of the men who eke out a living hauling loads. That was a characteristic touch of Laloo Prasad the politician still very much in touch with his roots. These were, expectedly, received with a sense of resigned despair by votaries of reforms. And Laloo Prasad did not disappoint, giving them ample reason to gripe with several of his other proposals as well.

Among the issues the Minister dealt with on a priority basis was security. Since July 1, amendments to the Railways Act have come into effect, vesting police powers in the Railway Protection Force and the Government Railway Police, for the investigation and prosecution of certain varieties of crimes committed in railway premises. This shifts the emphasis decisively from their earlier mission of only standing vigil over railway property.

The task calls for a larger manpower complement, and Laloo Prasad announced that he proposed to begin recruiting security personnel directly through force headquarters rather than the established board. No precise figure of the number of recruitments envisaged was provided, but unofficially, it has been put in the range of 15,000 to 20,000.

Expectedly, this has stirred up apprehensions that the Railways are being burdened with populist commitments that they are ill-equipped to fulfil. But the recruitments proposed are only a tiny fraction of the Railways’ total employment today, which is in the region of 1.5 million. And the additional wage burden is not expected to be significantly higher than the existing bill of around Rs.15,000 crores. That the additional manpower will be deployed in the security mission, which has been almost universally recognised to be a priority area, makes the charge of populism less than convincing. But that has not prevented the partisans of the reforms process from trying.

In the absence of any increase in freight rates and fares, the question of finding the resources for all Laloo Prasad’s schemes is, however, a well-founded one. Apart from the special attention that the Minister has bestowed upon the unorganised workers, he has also announced free travel concessions for widows of armed forces personnel killed in the line of duty, and unemployed youth travelling to attend Central government interviews. And the fine print of Laloo Prasad’s Budget shows that he is banking upon a certain degree of buoyancy in revenue accruals to the Railways. The year gone by has been a relatively good one for the Railways and this has undoubtedly fuelled the mood of optimism. But to bet on a second successive year of over-fulfilled targets is not an enterprise free of risks.

The Railways had made an initial freight plan involving the carriage of 540 million tonnes in 2003-04. As the economy rebounded briskly from the drought-induced downturn of 2002-03, the actual volume of freight carried went up to 550 million tonnes. This has undoubtedly induced the Railway management to budget for a further increase to 580 million tonnes in 2004-05. This projected increase of 5.5 per cent may not seem ambitious in comparison to the 6 per cent registered in the recovery year 2003-04. But it would otherwise be, by a substantial margin, the highest growth rate in freight traffic registered in the last decade.

Railway officials emphasise that there are factors working in favour of this ambitious target. The 1990s were a bad period for freight movements on account of a host of factors. Ministers averse to raising passenger fares sought to put the entire burden of supporting the Railways’ investment plans on freight rates, inducing a substantial migration of goods traffic towards the roadways. At the same time, the Railways’ ambitious unigauge programme, to convert the entire national network to the standard broad gauge, meant that existing metre gauge networks were temporarily disrupted, providing another powerful inducement for traffic to migrate to the roadways.

Both these factors have become inoperative in recent times in the Railways’ strategic calculations. First, the unigauge project has restored continuity of movement along most major axes of freight movement in the country. And second, a number of years of restraint in raising freight rates has established a more favourable parity in relation to competing modes of transport.

Indeed, with the unigauge programme having run its course along the main traffic corridors, the Railways’ concern, as outlined by Laloo Prasad, is now to develop alternative routes so as to reduce congestion in the network. The gauge conversion programme for 2004-05 hence targets relatively narrow stretches of track that could provide big benefits in terms of easing the load on the most congested routes.

The Railways have also set under way a programme for enhancing connectivity between the major hubs of economic activity in the country. In this respect, the project has taken a cue from the "Golden Quadrilateral and Diagonals" project, launched in 1999 by the Vajpayee government, with the aim of providing for heavier and faster road transit between the country’s main metropolitan centres. Coupled with this, the Railways also have a plan to provide quicker and higher volume connectivity to the country’s main ports.

This plan was launched in August 2002, but given its first infusions of funds only in the 2003-04 Railway Budget. Initial forecasts put down the total cost involved in the programme - called the National Rail Vikas Yojana - at Rs.15,000 crores. But the first infusion of capital into the Rail Vikas Nigam - a special purpose vehicle created for the purpose of implementing the plan - was a mere Rs.500 crores. Laloo Prasad now proposes further financing to the tune of Rs.717 crores. Together with these inflows,the Nigam would also be empowered to raise funds from the market for its investment programmes. But with its equity being rather limited, its ability to raise debt financing would be likewise constrained. And it would be a long time before the projected investment quantum of Rs.15,000 crores is met. The Railways’ effort to recapture aggressively freight traffic along the "Golden Quadrilateral and Diagonals" would obviously be limited by these factors.

THE Railways portfolio has been held for over eight years now, by politicians from the eastern region. The Ministry has seen four incumbents in this period, of which three have been from Bihar. With the exception of Nitish Kumar, who grudgingly conceded the case for a substantial fare revision in 2002, all recent incumbents in the Ministry have been notably resistant to the notion of increasing the burden on the passengers.

Nitish Kumar, however, made it amply clear when he introduced his interim budget for the Railways for 2004-05 in February, that his years of painful self-discipline when he conceded the case for rate increases, were only meant to set the stage for election-eve political giveaways. Laloo Prasad has maintained the huge roster of new train services that Nitish Kumar proposed and added a few of his own to it. The relative priorities among the Railways’ various investment heads - new lines, gauge conversion, rolling stock acquisition, signalling and telecommunications, electrification works, road safety, and others - have not changed in any significant manner. But perhaps the greatest assurance that Laloo Prasad’s proposals are on safe ground comes from the generous accruals that he has budgeted for to the Railways’ reserve funds. All these funds - the Depreciation Reserve, Safety Fund, and others - closed substantially above budgeted figures on March 31, 2004. With the figures budgeted in the 2004-05 proposals, they should close still higher on March 31, 2005. Even with a substantial shortfall in freight traffic, the Railways evidently have enough in reserve to meet essential investment needs. What could happen in the years to follow is, of course, quite another matter.

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