He must leverage the prime mover advantages of the Railways by tapping into supportive reports that include the recent ones on modernisation and rail safety.

The Rail Budget for 2012-13, on March 14, is a good opportunity to set the tone for bolstering the system and leveraging its prime mover advantages in the nation's transport segment. For Railway Minister Dinesh Trivedi of the Trinamool Congress (TMC), the onus on him is heavy as his mentor and leader, and his predecessor in the ministry, Ms Mamata Banerjee, deliberately desisted from exercising hard options lest she lose her sheen as a pro-poor leader.

Twelfth Plan's significance

From the time of the National Democratic Alliance (NDA) coalition, successive rail ministers have all used the system in their own fashion without paying due heed to its health. As the Rail Budget for 2012-13 is the inaugural year of the Twelfth Five-Year Plan (2012-17), a lot is at stake for this arterial mode of transport. Since July 2006, there has been no across-the-board increase in freight rates by the Railways, though a minor adjustment in telescopic rate structure was carried out in December 2010 in respect of all commodities save foodgrains, flour and pulses and chemical manure. There has also been a minor increase in freight rates of sugar and de-oiled cake, with no increase in that of salt and petroleum products.

More recently, the rates during busy season charges and Development Surcharge have been marginally tweaked from mid-October 2011, estimated to pan out Rs.1,914 crore in the remaining months of the current financial year. Even as passenger fares and the suburban rail services are cross-subsidised by freight earnings, the railways have not touched fares for far too long. It is small wonder then that the system today stands exposed for want of the wherewithal to finance its ongoing development work, leave aside fund other vital rail infrastructure that could take the travails out of travel for its millions of users — passengers and industry.

Its performance during the 11th Plan, which is drawing to a close by March 31, 2011, reveals a startling shortfall. Against the approved outlay of Rs.2,33,289 crore for the five-year period (2007-12), the railways is likely to fall short of the target by a hefty Rs.30,356 crore with the utilisation for the five years being put at Rs.2,02,933 crore. Within the broad head of an approved outlay of Rs.63,635 crore for gross budgetary support (GBS), internal resources of Rs.90,000 crore and extra budgetary support of Rs.79,654 crore, the final figure would be Rs.75,765 crore for GBS, Rs.72,519 crore for internal resources, and an extra budgetary support of Rs.54,648 crore, according to the 11th report of the Parliamentary Standing Committee on Railways' Action Taken Report on the demands for grants of 2011-12, tabled during the winter session.

Even as the Railways got higher budgetary support from the government, the organisation's performance has been deplorable in both raising internal resources and from the private sector through innovative schemes. The reason for this was not far to seek — the implementation of the recommendations of the Sixth Pay Commissions drained about Rs.73,000 crore of railway revenue in four years after 2007-08.

Privatisation

The lower mobilisation of extra budgetary resources stems from the non-materialisation through the PPP (public-private partnerships) route. The Railways had been talking about corporatising and privatising non-core and also a few core activities like track laying for quite a few years. But, the involvement of the private sector in container operations, special freight operations, setting up and operation of some freight terminals, catering and leasing of parcel vans for pre-defined spell through either licensing or contracts or concessions got bogged down in cumbersome documentation, making private investors lose zeal and the programmes the requisite traction.

With the glacial pace of part-privatisation of even peripheral activities, and PPP for genuine rail-related infrastructure stymied by investors' reluctance, the other extra-budgetary avenue of market borrowing has been ramped up to bolster the system. Ever since the Indian Railway Finance Corporation (IRFC) was set up to look after the financing of rolling stocks of the system, the annual borrowing target has gone up steadily from around Rs.2,500 crore in 2002-03 to Rs.14,800 crore in 2011-12.

The target of market borrowing for the current fiscal was initially pegged at Rs.20,595 crore which has been subsequently brought down. Borrowing to finance rolling stock is not a great option. Given the fact that rolling stocks remain the lifeline of the system, the future is fraught with risks if the costly borrowing route is persisted with. Unless, the operating ratios are brought down to leave a small surplus for undertaking new projects, expanding the existing ones or providing a crumb of comfort to the travelling public, critics warn that the IR will turn sclerotic before long.

The thrust of Rail Budget 2011-12 was on the setting up of several rail-based industries, infrastructure expansion through construction of new lines, doubling and metropolitan transport projects. But most of them may end up a chimera, announced as they were only to score political brownie points. Projects like the launch of high speed corridors and bullet trains have been touted for years. But, they remain on the drawing board even as technology for such trains does exist if the ground infrastructure of magnetic tracks and safety regulations are put in place by marshalling resources. One can only wish that with a slew of supportive reports, including the one just out on modernisation and rail safety just out, the Railway Minister would make a serious effort to improve the vast network for its long-term weal.

geeyes@thehindu.co.in