The Railways Budget 2013

The government has raised freight charges while leaving passenger fares untouched in the railway budget for 2013-14, its baby steps in addressing the wanton profligacy of past years and signalling the upcoming main budget will be responsible but perhaps not very bold. Presenting a budget high on promises to improve customer experience and put the world’s third-largest railway network on the track to financial recovery, Railway Minister Pawan Kumar Bansal kept his pledge not to raise passenger fares in 2013-14 after raising them just a month ago. But the 5% hike in freight rates, largely on the back of the move to link tariffs with fuel rates, will raise transport costs of commodities such as coal, cement and fertilisers, although officials played down fears this would lead to higher prices in an inflationary economy, saying the impact on inflation was likely to be a marginal 0.35%. Pointing out that rising diesel prices have already undone all the gains from the January passenger fare increase, Bansal pressed for insulating the railways’ finances in an era of deregulated fuel prices by introducing a fuel adjustment component (FAC) in freight tariffs from April 1, 2013. The FAC will be dynamic and move in tandem with global oil prices.
Bansal, is the first railway minister from the Congress Party in 17 years and whose maiden budget announcement was being keenly watched for clues on the government’s appetite for taking tough decisions before the 2014 elections.
Bansal spared long-distance and local commuters from higher fares, but raised the charges on Tatkal bookings, cancellations and for super-fast trains. These higher charges are expected to bring in Rs.881 crore in 2013-14, although the minister claimed the railways will absorb the Rs.850-crore addition to its fuel bill next year on account of higher diesel prices.
While industry welcomed Bansal’s promise of modernising stations, building rail lines and freight terminals through public private partnerships (PPPs), the freight tariff increase stirred strong reactions from the political fraternity, exporters and companies that use the rail network. The benchmark BSE Sensex, already weak because of global factors, extended losses after the railway budget, ending the day 1.6% down, with stocks of companies that cater to the railways sector falling between 8% and 14%.

But Bansal received praise from his boss, with Prime Minister Manmohan Singh calling the railway budget “forward-looking and reformist”. “It presents a realistic picture of railway finances. Bansal has done a commendable job in meeting competing demands of improving services and controlling expenditure,” Singh told reporters.

The chief opposition party, the BJP, was caustic, calling it a ‘Rae Bareli budget’ because of the minister’s announcement of three new projects based in, and three new express trains passing through, Congress President Sonia Gandhi’s Lok Sabha constituency in Uttar Pradesh. By contrast, Bansal only announced one major project in his own constituency Chandigarh, a signalling equipment facility to be built on public-private partnerships (PPP) basis.
Indian Railways, long used by successive ministers to dispense patronage, has been sitting on a mountain of losses, unable to invest in its upkeep and modernisation. This year, it is expected to lose around Rs.24,600 crore largely because of subsidised passenger fares.
As much as 40% of Indian Railways’ goods traffic comprises coal, stoking concerns of a further increase in power tariffs across the country by 3-4%. A shift in traffic from rail to other cheaper modes of transport for commodities could affect the railways’ plan to rake in 9% more freight revenue in 2013-14.
The railways has been consistently losing the freight market to road transporters, who now account for 57% of India’s goods movement while the railways carries just 36%. Indian Railways has joined a select club of global rail systems that ferry over a billion tonnes of freight — in 2012-13, it carried 1,007 million tonnes, a number that is expected to increase by 40 million tonnes in 2013-14.
Bansal unveiled a slew of passenger-friendly initiatives with specific steps to woo the young travellers such as offering Wi-Fi Internet access on trains, ticket booking via mobile phones, and a faster portal to process online bookings. He also committed to improve amenities at stations and in trains for the disabled while promising additional safety for women passengers.
Bansal expects Rs.6,000 crore to flow into the railways’ kitty this year through so-called PPPs to build freight terminals, modern stations, new rail lines and the signalling equipment facility in his constituency, Chandigarh. The minister is betting that the railways will be able to attract Rs.1,00,000 crore of PPP investments over the next five years in projects such as the dedicated freight corridors, Mumbai’s elevated rail corridor, and power plants.