Indian Railways corrects its course under Gowda
Putting the derailed railways back on track
(At the end of the article see the good words and phrases used in this article)
Riding on the back of its massive election victory, the Modi government has rightly decided to eschew the populist policies of the earlier governments and set out on a path of course correction for the railways. The resounding victory has allowed the BJP to retain the portfolio to itself instead of gifting it to an irresponsible ally out to get some popularity at the cost of the long term interest of Indian Railways. It has decided to increase the passenger fares by 14.2 % and the goods fare by 6.5%. This will help the railways to augment its cash earnings to certain extent.
Like this, the NDA government under Modi will have to take a series of steps which will bring distress to the common folks. Possibly, the government will phase out subsidies to the petroleum, diesel, kerosene and cooking gas. Similar withdrawal of sops are expected in areas like fertilizers and certain food items such as wheat and rice. For a responsible government, it is essential to set the finances of the country right, rein in inflation and curb unnecessary government expenditure. It remains to be seen if the Modi government summons the courage to curtail the hugely wasteful MNREGA scheme, which pushed inflation upwards and drained the government treasury. It was the programme Sonia trumpeted energetically to win her votes from the poor. Sadly for her, the failings of her government overshadowed the perceived benefit of such doles. The poor got the benefits, but denied Sonia their votes.
Credit must go to Sadanand Gowda, the new Rail minister for deciding to take such an unpopular but justified decision. The fare increases include a flat rate increase and a fuel adjustment component. Mr. Gowda took the decision which the out-going UPA government had taken, but kept it on hold to avoid incurring public anger. It was one of the many acts of political expediency of the Sonia-Man Mohan led UPA 2 government.
The two hikes will boost the annual cash earnings of the Indian Railways by anything between Rs.7,000 crore and Rs.8,000 crore. Because of the passenger fare remaining static for the last five years, Indian Railways was losing a whopping Rs. 900 crores a year. This was being made good by increasing the freight charges. Clearly, the logic behind such a policy, adopted by Lalu and Mamata purely for populist considerations, was fiscally unsustainable.
The timing of this increase, however, raises hackles. Why did the Minister not bring it in his upcoming rail budget due in a few weeks time? The opposition has blamed the minister of giving short shrift to the parliament by announcing the fare rise unilaterally. Mr. Gowda, no doubt, stands on slippery ground on this score.
The Indian Railways moves a whopping 20 million passengers a day. Carrying so many passengers without realizing a reasonable fare from them is an inexcusable act of irresponsibility, especially when the railways’ need of funds for expansion and modernization is huge. Carrying passengers, while starving the carrier, smacks of foolish imprudence. Pawan Kumar Bansal of the Congress, on assuming the charge of Railways in 2013, tried to reverse the Lalu-Mamta trend by increasing the fare somewhat. His successor Mallikarjun Kharge also effected a small upward revision of fare. But, all these were nothing better than paying lip service to an urgent cause. Now, Mr. Gowda, emboldened by the backing of his prime minister, has gone the whole hog and brought the fare to a realistic level. He needs to be applauded for his bold decision.
The freight increase will undoubtedly aggravate inflationary pressures. But, this will cause less damage to the economy than having a crucial infrastructure facility like the railways unable to garner cash to modernize and expand. With no cash in the kitty, railways had to borrow money from the market. Such loans have to be serviced. The railways struggled to service the loan burden. Alarm bells had begun to ring in the Railway Board and the ministry.
Quite judiciously, the new government has decided to welcome private and even foreign investment in infrastructure projects, within whose gambit the railways come. With improved cash flow, Railways will now be able to quickly finish incomplete slow-moving projects. Crucial areas like safety and security during travel will get the desired attention and funding. The public, upset with the fare increase, will quickly forgive Mr. Gowda, if he succeeds in making train travel safe, comfortable and an enjoyable experience.