Page 20 - 30NOV2018E

CoverStory

Has tHe engine of

growtH derailed?

When Prime Minister, Narendra Modi in a White Paper on Indian Railways wrote on
February 24, 2015 that “Railways, perhaps along with post offices, are the only two institutions
in India with a deep network which if tapped judiciously can create substantial improvements
in the hinterland. Railways was always considered only as a mode of transport in our country,
we want to see Railways as the backbone of India’s economic development”, it was expected
that the government would bring about a turnaround in this engine of growth. However,
it seems, safety has taken a back seat and focus shifted elsewhere. We are reproducing an
amended analysis published in Tehelka by madan gopal banga

ith his stirring words, the prime min- the viability of investments. The Railway Ministry
ister had emphasised that Indian Rail- constituted a committee to examine the cost of
way is the engine of growth for the funds. A report on various means to raise funds
W nation. Years later, experts are ask- has been submitted to Niti Ayog. Based on some
ing whether the engine is capable of hauling even case studies, it emerges that the cost of external
its own weight, let alone hoisting the burden of funds on face value appears to be of low interest
economic development on its shoulders. of libor+1 to 2 percent. However, if currency fluc-
Consider the financials. Consequent to acceptance tuation or the cost of hedging currency is taken into
of the Seventh Pay Commission report, Railways will account, this goes as high as 8-8.5 percent. There-
have to bear an additional burden of 40,000 crore. fore, at such low profitability, railway on stand-alone
This will lead to its balance sheet, already worn thin, basis would not be able to justify borrowing of funds
developing a big hole in the centre. There is no way either from the domestic market or from global
that Railways can meet this massive burden consid- banks or funds and it would need the support of the
ering its current trends of revenue and expenditure. Finance Ministry.
The expected revenue earning by the railways is of It would not be difficult for Railway Minister
the order of 150,000 crore for the year. Currently, it Piyush Goyal, a chartered accountant by training,
has an operating ratio of 93, meaning out of every to understand this fact, which is staring him in the
one rupee earned by the railways, 93 paisa is spent face. In its history of seven decades, the Railways has
as operational expenses. The remaining 7 paisa, never shown a negative Profit and Loss Account.
amounting to 10,500 crore of the total, is surplus. Imagine, if in the upcoming Union Budget, a hand-
Mind it, this ‘surplus’ is what should ideally be picked minister considered for his acumen presents
used to carry out regular maintenance work and first time a loss-making rail budget, no account of
replace its aged assets, thereby ensuring passenger explanation would suffice to silence the roar from
safety. On condition of anonymity, some officials Opposition benches. Even if we consider the social
from the Railways say that General Managers of burden of railways — specifically, subsidies under
different railway zones are cribbing that they have social obligation — this is estimated to be about
funds only for jhadu-pocha (sweeping-mopping) of 25,000 crore every year. The whopping losses would
platforms, nothing to carry out any infrastructural be difficult to be justified. Which is why a smart
improvement. solution has been found: merge the rail budget with
The narrow margin of revenue over expenditure the general budget, transfer the burden of subsidies,
also affects an entity’s ability to raise capital from pension, fuel bill. Present a clean balance sheet and
any source, as there will be a question mark on do a good window dressing!

Tehelka / 15 november 2018 20 www.Tehelka.com

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