Indian Railways – On the Right Track of Transformation - Eastern Mirror
Tuesday, May 30, 2023

Indian Railways – On the Right Track of Transformation

By EMN Updated: Mar 01, 2021 10:48 pm

Once in a century challenge that humanity faced in the form of Covid-19 has altered both consumers & businesses at a fundamental level. Drawing up Budget has always been a tenacious exercise. The challenge at Indian Railways was accentuated by lockdown resulting as passenger train operations were hit & so were revenues.  Critics point that operating ratio of Indian Railways has deteriorated & is becoming financially unsustainable. In past decades, Indian Railways has faced such challenges many times & each time it rebounded strongly silencing nay-Sayers.

The problems of Indian Railways were well known to committees. Indian Railways is reinventing itself. Be it bureaucratic obese structure or “empire building” mindset. Recent reforms at Rail Bhawan are testament to not only identifying the issues but addressing them immediately. The reorganisation of Board has put an end to decades old departmental mindset. One should also consider the reforms that IR has undertaken while analysing the ills & shortcomings to get clearer picture.

Coming back to Railway Finances. It is true that IR has faced financial challenges in recent times. But that has been the case whenever new pay commission recommendations were implemented. Businesses can’t & shouldn’t consider short term solutions. Raising freight tariffs beyond a point are counterproductive both for Indian Railways & for economy. Indian Railways till recently has been meeting all its revenue expenditure from its revenues receipts. Any short-term gap because of pandemic or slow down can’t be a reason to write off Railways. Even when all operations were halted & with no revenues, Railways ensured timely payments of all its dues on account of Salary, pensions, lease charges etc. Railways’ Expenditure optimisation should be applauded. Without compromising on safety & security, Indian Railways has projected a savings of ` 22,000 cr in RE aided in part by timely policy interventions by Govt. Investments on electrification in past is already paying rich dividends. It is expected that `14,500 cr will be saved through electrification of broad gauge routes. Multitasking & better utilisation of manpower resources is helping in massive productivity gains.

While RE has projected an Operating ratio of 96.96, this is on account of support from Ministry of Finance to meet out short term resource gap. The support extended by Government will ensure that Railways remains financially viable & is able to payback the advance expeditiously.

Unparalleled challenges thrown up by Covid-19 only strengthened the tenacity of Railways to ensure an exceptional all round performance despite obstacles. The freight business has been breaking records like never before & business development is reaching new dimensions each day. Formation of Business Development Units (BDUs) at Division & Zonal levels, doubling of the speed of freight trains from 23 kmph to 46 kmph, introduction of time tabled parcel trains & the ongoing freight rationalisations including concessions have shown positive impact on the loading trends. The speeding up of train is a better indicator for asset utilisation from customer perspective. The planned capex & introduction of new technologies will ensure better & safe utilisation  of assets.

Railways is a derived demand. Any slowdown in global economy also adversely impacts demand for railway freight. Long term impact of pandemic on passenger operations is also being studied.

“Building wealth is not a sprint. It’s a marathon”. The creation of infrastructure is essential for countries’ economic development & “Aatmnirbharta”. Indian Railways not only maintained its Capex targets in RE but is on way to meet them. The General Budget 2021-22 has been momentous for Indian Railways. Railways witnessed a “record” budgetary allocation of ` 1.10 lakh crore in the Budget, with total capital expenditure outlay of ` 2.15 lakh crore for 2021-22.

Creation of national infrastructure should not be viewed from the narrow prism of return on capital. Railways projects or for that matter any infrastructure projects impact the socio-economic conditions for entire populations. If rate of return is taken as the only benchmark, than only the business centers will be having rail connectivity & hinterland will be deprived of safe & environmentally advantageous medium of connectivity. 

The Capex plan will enable Railways to fund projects under National Investment Pipeline, &  to priority projects under Vision 2024. Extra Budgetary resources are being raised at extremely competitive rates to fund remunerative projects. This is being done with adequate moratorium to enable these projects to be self-sustaining without leading Railways towards debt trap.

Higher Capital budget will help in completion of National Projects in J&K, HP, Uttarakhand& North East States. National Projects were  allocated highest ever outlay of `12,985 cr. in BE 21-22 against the RE 20-21 of Rs 7535 crie. increase of 72%. Dedicated Freight Corridors (DFCs) & other important throughput enhancement projects have been prioritised & are on-track. ` 37,270cr of capital  allocated for investment in companies  with allocation for DFCCIL of  `16,086 cr, NHSRCL of `14,000 cr & KMRCL of ` 900cr. These projects along with other infrastructure & safety works will give a boost to the construction industry resulting  in employment generation. Railway capital spending has a huge multiplier effect on overall economy. 

Railways are constantly adapting to changing business requirements, reinventing itself & ensuring it place as life line to nation, while meeting the social obligations out of its revenues. 

Naresh Salecha is a
Member Finance & ex officio Secretary to Govt
Railway Board, Ministry of Railways.

By EMN Updated: Mar 01, 2021 10:48:23 pm