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Wednesday , February 27 , 2013
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2% Didi, 98% no drama
Freight linked to fuel, fees raised

New Delhi, Feb. 26: Railway minister Pawan Kumar Bansal today struck a fine balance between the exigencies of crafting a populist budget ahead of the general election next year and the economic necessity of putting the utility’s finances in order.

He linked freight rates to fuel prices for the first time but chose to give passengers some more time before they too gravitate to a new pricing system that is designed to insulate Asia’s oldest network from the wild swings in energy prices.

The new mechanism will raise freight rates by 5.8 per cent when the charges for transporting goods and commodities become linked to fuel prices from April 1.

Although the budget was not free from an element of populism — a hallmark of Mamata Banerjee and several of her predecessors at Rail Bhavan — Bansal steered clear of rhetoric and headline-grabbing promises.

The absence of state-specific generosity ignited protests from the Trinamul Congress and UPA ally Sharad Pawar.

Bansal responded later, presumably with tongue in cheek: “I was surprised by the Trinamul Congress’s protestů. I admit that 98 per cent of the budget is not going to Bengal.”

Sarcasm was not in short supply at the other end of the spectrum either. The announcement of a wheel factory at Sonia Gandhi’s pocket borough prompted the BJP to call it a “Rae Bareli budget”.

Bansal said the railways would absorb the Rs 850-crore burden for sparing passenger fares from the rigours of the new system. No timeframe has been set for tying passenger fares to fuel rates. But this could happen when an independent rail tariff authority is established. A proposal for the authority has already been prepared and Bansal is expected to place it before the cabinet within the next two months.

But the government isn’t expected to be in a tearing hurry to link passenger fares to fuel prices with the elections looming next year. As a result, the railways will have to live with a loss of Rs 24,000 crore this year for operating 12,335 passenger trains that carry 23 million people every day.

Railway fares were raised by 8 to 20 per cent on January 9 in a pre-budget exercise and Bansal — the first Congress minister to present a railway budget in 17 years — was able to avoid another fare hike. The across-the-board fare increases in January, the first in the past 10 years, were supposed to yield Rs 6,600 crore in a full year. However, the sharp increase in diesel prices wiped out over half of that amount.

So, the railways chose to tweak supplementary rates like fees for reserving and cancelling tickets and booking Tatkal slots. (See chart on right)

The freight rate increases will net Rs 4,200 crore a year while the rise in passenger reservation and related charges will rake in another Rs 483 crore.

Freight rates will be revised twice a year — rising or ebbing in sync with fuel prices under a scheme called the Fuel Adjustment Component (FAC) which “will be dynamic in nature based on changes in input fuel cost”.

For the first time, Bansal has drawn up a list of 347 projects from a dust heap of promises made by his predecessors that will be fast-tracked for execution. Railway ministers have tended to lay tracks and locate wagon factories in their home states to curry favour with their voters.

He announced plans to set up a debt-servicing fund to meet committed liabilities arising from World Bank and Japanese loans meant for the dedicated freight corridor projects and other future liabilities.

The railways is aiming for a record Rs 1.46 lakh crore in revenues in the next financial year even as it is likely to miss the total resource mobilisation target of Rs 1.35 lakh crore set for 2012-13. It is expected to fall short of targeted revenues by as much as Rs 7,491.66 crore mainly because of lower passenger and freight earnings.

The state-owned network will borrow Rs 15,103 crore in the year starting April 1, almost the same amount it aims to raise this financial year.

The railways will add 500km of new lines next year — which is about half of the overly ambitious target that Mamata set for herself in 2010-11 and was never able to meet. The railways add about 180km of new tracks every year on an average.

Bansal kept unchanged the number of wagons the railways traditionally buys every year.

Industry neither cheered nor jeered the budget. Ficci secretary-general A. Didar Singh said: “The railway budget reflects the difficult economic scenario... (however) contains several proposals which, if implemented, would set a growth multiplier in motion.”

D.K. Aggarwal, chairman and managing director of SMC Investments & Advisors, said: “Stocks fell after the budget as no major announcements were made for big-ticket projects. Clearly, it shows that the government this time is sticking to basics and does not want to project itself by announcing populist measures which cost dearly and put finances in a troublesome position.”

The sensex hit a three-month low today, probably pulled down by the railway budget and graver global factors.

The railway minister, however, did slip in some growth catalysts. Several rail-based factories and workshops were announced. The railways are also expected to award construction contracts for about 1500km of tracks on dedicated freight corridors.

The minister said he would make a concerted effort to fill as many as 1.52 lakh job vacancies. However, analysts were sceptical about the ability of the railways to farm out so many jobs within a year and please the UPA’s vote bank.

The Rajdhani and Shatabdi trains will have a modern coach called Anubhuti that will provide greater travel comfort. Such travel will be priced separately.

Bansal acceded to his wife Madhu’s demand for a security helpline that women in distress could call.