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Rail rides Economy Express

New Delhi, Feb. 26: The economy is booming and the Railways is hitching a ride on the gravy train.

Over the past two years, the Railways has been scooping up the gains from a booming economy and have recorded high growth in freight and passenger earnings.

This year it expects to fare better.

Senior railway officials admit that the demand for railway wagons is a “derived demand” and the growth in traffic depends on the economic growth rate of the country.

“The over 9 per cent growth rate of the economy during 2006-07 has been a boon for the Railways. If this growth rate continues, the Railways will do well again,” said a senior official.

When the economy surges, more goods are produced and this generates a higher demand for transporting inputs such as coal and iron ore and finished goods such as steel. Freight is the main money spinner for the Railways accounting for over two-thirds of its earnings.

While part of the increase in passenger traffic is normal every year due to a growing population, higher incomes in a booming economy also means more people can afford to travel. And that results in a spurt in passenger traffic.

The introduction of new trains such as the airconditioned ‘garib raths’ are not expected to add much to the profits of the Railways with the result that freight traffic will continue to subsidise passenger traffic as has been the case in the past.

Senior officials say the political decision to introduce 40 new trains will have an adverse economic impact as it will add to the traffic congestion on the rail network. This would lead to a slowing down of freight traffic.

It is also expected to have safety implications as running so many trains would squeeze the time required for maintenance work on the tracks and bridges that would come under increasing strain.

Lalu Prasad’s budget is banking on a reduction in freight rates to attract more traffic. It perhaps also realises that with the axle load already having been increased to 22.5 tonnes in the last two year, there is only a limited scope for this quick-fire measure to work again.

The new step to increase the axle load to 25 tonnes on select sections is, therefore, being undertaken cautiously as part of a pilot scheme. Similarly, the scope of most goods trains has already been increased and productivity linked increases that require new wagons will take their time.

The railway budget recognises that the slack in the system lies in the empty rakes that return to the coal mines after delivering their cargo to the power plants and the iron ore mines after making their run to the steel plants.

It is here that massive discounts have been offered in today's budget to woo customers to make use of these empty trains and rake in revenue. While the discount has been jacked up from 20 per cent to 30 per cent, it will be valid in the peak season as well. The Railways aims to attract wheat, cement and fertiliser cargo through the move.

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