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BW Businessworld

Looming Danger

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The latest parliamentary panel report on Indian Railways has some alarming statistics. It talks about a severe financial crisis; fall in operating ratio, and an impending debt trap.

The fact that the 31-member panel that scripted the report was headed by Dinesh Trivedi, a former railway minister with a ring-side view of the problems, makes the findings more serious as they casts doubt over the soundness of the long-term strategies identified by Railway Minister Suresh Prabhu in the Rail Budget. The panel’s recommendations were on the basis of its scrutiny of the “demand for grants” made by the rail ministry for 2015-16.

The crux of the matter is the following: under-provisioning for depreciation and the inability of the railways to generate enough cash flows for servicing, and increased borrowings for financing of rolling stock have resulted in a sharp decline in track renewals, procurement of wagons, coaches and electric locos.

The Trivedi panel states that there are no quick fix solutions to avert this crisis. It wants the government to earmark its funds (Rs 65,000 crore) for low-cost, short-gestation, rapid-pay back and high-returns investments on a priority basis. “Such investments would include increasing the length of the platforms and goods terminals, upgrading and strengthening infrastructure at examination and maintenance depots and deploying information technology for strengthening the freight and passenger operating information systems. There should be no restriction (subject to availability of funds) on taking up works for replacement of over-aged assets, traffic facility and throughput enhancement,” it notes.

Stating that the Centre needs to chip in more funds to support railway modernisation, the panel wants the returns from the limited funds (currently available) to be multiplied manifold by fostering strategic alliances with the private sector.

The key obstacles before Indian railways — narrow departmentalism, monopoly mindset and lack of commercial orientation — continue to be the same, and cannot be easily overcome, notes Trivedi panel.

Incidentally, during his brief eight - month stint in 2011-12, Trivedi had tried to de-politicise the railway system and increase travel fares. Its political incorrectness led to his unceremonious removal from that post by his party chief, Trinamool Congress supremo, Mamta Banerjee at that time. Though the key problems identified by Trivedi remain the same, the solutions he has suggested are more mature. The committee cautions against text book solutions of privatisation, downsizing, frequent passenger fare hikes, and says that apart from being politically unpalatable, those are not enough to transform the financial health of the railways. Instead, it calls for scale-driven strategy of ‘playing on volumes, reducing unit cost and tariffs and gaining market share and margins.

Prabhu can only be wiser by listening to Trivedi.

(This story was published in BW | Businessworld Issue Dated 18-05-2015)


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