INDIA is one of the few countries to have a separate railway budget, which is presented in parliament by the government every year to seek approval for expenses, investments and revenue raising measures relating to the national transporter.

The railway budget, introduced by the colonial rulers in the mid-1920s, may have made sense when the transport network played a major role in the nation’s economy, accounting for more than three-

quarters of the government’s total budget. But today, sectors such as defence, oil and gas have a far greater share of the total budget than Indian Railways.

Presented in parliament last week by D.V. Sadananda Gowda, the railway budget revealed that the total revenues (both traffic and passenger earnings) added up to a little over Rs2trn, not adequate to even classify it among the top five corporates in the country. Two of India’s leading corporates have more than double the revenues of Indian Railways. State-owned Indian Oil Corporation clocked in revenues of Rs4.75trn, while private sector behemoth Reliance Industries Ltd has a turnover in excess of Rs4.02trn.

The Railway budget now equals to less than 15pc of the general budget of the government, indicating the far smaller role that it has in the overall economy. Yet, politicians are loathe to let go off their control over the functioning of the national transporter, which continues to be a laggard when compared to railway systems in China, Japan, Europe or the US.

Gowda did initiate measures to loosen the hold of politicians and bureaucrats over the functioning of Indian Railways by revealing the government’s plans to allow foreign direct investment (FDI) in the sector. He also focused on the increasing role of private-public-partnerships in taking up new projects across various segments including infrastructure, new routes, freight terminals, house-keeping and catering.

Expectedly, political parties such as the All India Trinamool Congress from West Bengal and the Rashtriya Janata Dal and Janata Dal (United) from Bihar, who had treated the ministry (when their leaders headed it in recent years) as their personal fiefdom, announcing new trains and even routes to their MPs’ constituencies even though they were non-viable, hit back at the BJP government for opening up the sector.

Of course, Gowda did not launch any radical reforms measures to improve the state of Indian Railways and opted for cosmetic changes. His move last month to hike passenger fares by 14.5pc and freight charges by 6.5pc had been received by a volley of protest from political parties.

Most political parties in India firmly believe that state-run transporters such as the railways should offer highly subsidised services to passengers, not just the poor, but even the middle-classes and the affluent. Any move to hike fares is met with stiff resistance. The failure to raise fares in recent years has led to a sharp fall in investments in not just rail infrastructure, but even safety measures, resulting in a spate of accidents.

Last year, there were more than half a dozen major railway accidents across the country, killing nearly a hundred passengers.

INDIAN trains are also among the most unreliable in the world, and delays are rampant. At a time when bullet trains zoom at speeds of over 400 kmph in countries such as China, Japan and in Europe, in India trains still chug at sub-60 kmph speeds. The absence of twin tracks even along major routes results in major super fast and express trains having to halt at small stations for several minutes, sometimes even an hour or more.

Gowda announced his government’s plans to introduce bullet and high-speed trains linking major metros in India. The first bullet train, with a speed of 350 kmph, is expected to be introduced over the next decade between Mumbai and Ahmedabad. The cost of setting up such a service is huge; Gowda disclosed that setting up just one such link between two cities would cost about Rs600bn.

He also wants to start high-speed trains — travelling at speeds of 160 and 200 kmph — linking major cities and state capitals. Indian Railways is virtually bankrupt, unable to invest money in new projects. Its operating ratio — which tracks operating expenses as a percentage of revenues — reflects the appalling inefficiency of its operations; the ratio has gone up to 92.5 in the current fiscal, from 90.8. Out of every Rs100 that the railways earn, Rs92.5 goes by way of expenditure, leaving virtually nothing for investments in new routes, upgradation of existing trains, modernising stations and improving passenger services.

The Railway minister estimates that a whopping Rs5trn is needed to implement ongoing projects — announced amidst great fanfare by previous ministers to satisfy their constituencies — many of which are commercially unviable.

Unfortunately, the minister failed to touch upon the possibility of corporatising the railways; the gigantic organisation is run by a board that is answerable to politicians and bureaucrats. Experts have called for the unbundling of the railways into different business units, each of which should be made into a profit centre.

For instance, the suburban services in Mumbai — which cater to the needs of more than a quarter of the 23m -plus passengers who travel by train daily in India — should ideally be managed by a commercial entity of Indian Railways that is based in the metropolis. But since the railway board controls the suburban system, investments and decisions are delayed for years.

Experts have also been urging the railways to leverage assets in terms of land, stations and commercial buildings. Indian Railways can lease the thousands of acres of land that it owns — but mismanages and allows encroachers to put up unauthorised structures — and earn lucrative sums. Railway station buildings can similarly be leased out to offices or even hotels.

The highly-unionised organisation is also not fleet-footed and fails to capitalise on opportunities, especially in catering to the needs of city-based commuters or businesses wanting to transport goods across the country.

The railways’ share out of India’s total cargo is now down to a third, despite the fact that it is the cheapest mode of transport — even after hefty hikes in tariffs. But massive delays in delivering cargo, thanks to bottlenecks in the system, discourage businesses from sending goods by train.

Published in Dawn, Economic & Business, July 14th, 2014