Indian Railways losing steam with freeze on fare hikes

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With passenger fares on a freeze for years and little money to expand the world's second largest railroad network under a single management, Minister Dinesh Trivedi has an unenviable task when he presents the annual Railway Budget March 14.

Poor financial management over the past few years has left Indian Railways staring at an earnings shortfall of Rs.7,000 crore despite gross budgetary support of Rs.20,000 crore last year and a Rs.3,000-crore loan approved by the finance ministry on February 6.

"Revision of passenger fares is long overdue. The railways need to invest in additional lines and build more rakes," former Railway Board chairman R.K. Singh said even as experts said populist measures of the Trinamool Congress have held the railways hostage.

As per estimates, a 25 per cent fare hike can generate Rs.12,500 crore and is crucial to Indian Railways that runs 10,500 trains and ferries 22 million passengers daily over 114,000 track km. The fares were last hiked in 2002-03.

"It is an unprecedented situation," a senior railway official commented on condition of anonymity while describing the financial crisis, adding that it will certainly not help since Trivedi belongs to the Trinamool Congress, which is opposed to any fare hike move.

With 19 members in the Lok Sabha, the lower house of parliament, the Trinamool Congress is a crucial ally of the United Progressive Alliance (UPA) government of Prime Minister Manmohan Singh and has often shelved key reforms such as foreign equity in retail.

The last fare rationalisation exercise was in 2002-03, when the minimum fare for second class mail and express trains was hiked by Rs.1 from Rs.15 to Rs 16. For long distance trains, up to 341 km, the hike ranged from Rs.1 to Rs.6.

As a result of the moderate nature of the hike, as opposed to a more realistic exercise, the operating ratio now stands at 100 per cent, up from 75 per cent in 2008-09. This means every rupee generated is spent on running the network, with no room for expansion.

"All big projects are at a stand-still. The railways are unable to maximise earnings," said Singh, adding there is no money left to address crucial areas like the renewal and replacement of existing assets and taking up further development projects.

For the record, the working expenditure of railways, which was Rs.73,000 crore in 2010-11, is likely to shoot by over Rs.6,000 crore during this financial year, ministry sources said .

This, together with a carryover of Rs.2,000 crore shortfall in the earnings in 2011-12, is expected to dent the internal resource-generation exercise by Rs.8,000 crore during this fiscal, they said.

Several representations have been made to revise passenger fares since this is seen as the only way. Those in favour include the Parliamentary Railway Convention Committee, the Planning Commission and even trade unions within the establishment.

Will Trinamool Congress chief and West Bengal Chief Minister Mamata Banerjee - herself the railway minister till last year - permit such as move? An answer to this will come only March 14 when her party colleague Trivedi presents his maiden Railway Budget.