Events & Issues

New Delhi, 19 October 2016

No Separate Rail Budget

STEP TOWARDS PRVATISATION?

By Dr S Saraswathi

Next year’s Union budget, 2017-18 will introduce a big change in India by scrapping the practice of presenting a separate Railway Budget before it. The two will be amalgamated as one Budget and presented on 31^st January – a month before the normal time.

Announcing this major decision of the Union Cabinet, Finance Minister Arun Jaitley gave an assurance that the functional autonomy of the Indian Railways would continue without change.  But, people are likely to foresee the repercussions of this move as transformation of the management of a large network of a nation-wide public transport service and of a big chunk of government employee - a move towards eventual privatisation of the Indian Railways.

What the government expects and speaks of is an immediate saving of Rs. 10,000 crore annually to the Railways – the sum paid by the Railways to the Government as dividends. Scrapping of the practice of presenting a separate budget is not likely to be accepted without criticism by political opponents. The bogey of privatisation of a public utility service will be raised and prospects of fare rise, cancellation of some railway concession will be highlighted. Tighter vigilance over malpractices and corruption at every point will have to be ensured as people expect. 

In India, the Railways took roots mainly as commercial venture. In 1844, private entrepreneurs were allowed to set up rail system by the East India Company under 99-year lease system. The Great Indian Peninsular Railway, and the East Indian Railway were set up in 1853-54 to construct and operate rail lines near Bombay and Calcutta.

A big plan to construct a network of trunk lines connecting different regions of the sub-continent was formulated by the then Governor-General, Lord Dalhousie who was instrumental in introducing postal services also. These innovations for integration and consolidation of the British colonial rule became one of the causes for the first war of independence that ended the regime of the East India Company.

However, the Railways have come to stay, and the Southern Mahratta  Railway was founded in 1882. By 1900, a multitude of rail services with diverse ownership and management were operating in India. By 1947, there were 42 rail systems in India, including 32 owned by the former Princely States. They were all integrated and nationalized as one unit in 1951 as the Indian Railway.

Separate Railway Budget was started in India in 1924 when railway employees constituted about 44 per cent of  the total  civilian employees in the country. About 3/4 of the country’s budget was earmarked for the railways under the British rule. The infrastructure for rail transport in most places had to be created from the scratch.  The expenditure on railways was much higher than the total expenditure in all other administrative sectors put together at the time of independence.

In recent years, the share of the railways in the total budget has been decreasing due to expansion and development of several new sectors. The burden of the railways, which were handling most of the cargo in the country, is drastically reduced to about one-third due to enormous increase in road traffic and growth of trucks and lorry services.

To the common citizens, a separate railway budget or an integrated single budget makes no difference. All that they want is sufficient resources for expansion and enhancement of facilities for rail travel and for improvements in comfort and safety during travel, and opportunities and time for discussion of all matters relating to rail travel.

All proposals pertaining to railways will hereafter form part of the General budget. However, a separate discussion on railways will take place in the budget discussion. The decision of the government is one of the several steps following from the recommendations of a high-level committee appointed in 2014 to study mobilization of resources for major railway projects and restructuring of Railway Ministry and Railway Board.

This committee – Bibek-Debroy Committee – has made several crucial recommendations, which if carried out, will put railways on a sound track so as to perform its function as an essential public utility efficiently without getting reduced to a loss-making public venture. The Committee has outlined a 7-year plan for transforming rail transport into a government-owned Special Purpose Vehicle.

Among its ten major suggestions mention must be made of establishment of an independent regulator for railways; transition to commercial accounting system; decentralization; setting up a railway manufacturing company; encouraging private entry; changing relationship between the government and railways; and raising resources. 

The Report made a strong plea for transparency and efficiency in administration so as to attract public, private and foreign investments in the railways. In the age of global competition, a massive public utility service of the size of the Indian Railways has to take advantage of its commercial potential for the good of the nation. It is estimated that the losses incurred by the railways are increasing rapidly from about Rs. 6160 crore in 2004-05 to Rs. 30,000 crore in 2015-16 – a situation unacceptable.

Presently, there are about 14 subsidiary undertakings under the direct control of railways including the Container Corporation of India and Indian Railway Catering and Tourism Corporation. There is also a Research and Development Wing known as Research Designs and Standards Organization (RDSO) for the tasks of research, designing, and standardization.

Railways is the biggest employer in the country having two big groups – IR Technical Service and IR Non-technical service. The former includes  six  services  (IRSE, IRSSE, IRSEE, IRSME,  IRSS, and IRLS) and  the latter three services ( IRAS, IRPS, and IRTS).

India today stands fourth according to the length of rail network after the US, Russia, and China.

Reorganisation including privatisation of railways is going on in all countries all over the world.    In most of the western nations, railways started as private enterprise, came under State control in the beginning of the 20^th century, nationalised after the Second War, and reverted to privatisation later.

The British Railway carried out infrastructure work and structural modifications in the 1980s and passed the Railway Act in 1993 which paved the way for privatisation. In 1996, over 100 business concerns were in the railways.  Today, it is run as inter-linked companies accountable to their own shareholders.

In China, the Ministry of Railways, considered as the “last fortress of planned economic system” was dissolved in 2013. Its duties were split in three parts and transferred to the Ministry of Transport, State Railway Administration, and the China Railway Corporation.

Japanese railway has been mostly in the private sector except for some period after the Second World War. It presents a success story, though presently faces big competition from road transport.

India cannot blindly follow the footsteps of any other country. It is a vibrant democracy with very active political parties eagerly looking for opportunities to raise controversies and put obstacles. People are familiar with socialist ideals of State control and populist politics of elective democracy. They are bound to detect anti-poor and pro-rich elements in any major economic reform. Especially in public utilities and essential services, every change must be accompanied with immediate benefit in some form to the users for its smooth passage. ---INFA

(Copyright, India News and Feature Alliance)