Indian Railways: Not Quite on Track

Today, Indian Railways stands in a very sorry state, with a minister, whose heart is clearly elsewhere. It is not only the increasing number of mishaps that the Indian railways has faced in the recent times, but also, the ailing finances of the largest employer, that is responsible for its present misery.
The deterioration in the finances of the Indian Railways is far worse than what the government had expected. A review of provisional data for FY 2010 shows that its revenue surplus has dropped to a low of Rs1 crore, compared with Rs4, 456.78 crore in 2008-09. In the Railway Budget presented on the 24th of February, the government had pegged the revised estimate of revenue surplus at Rs951.03 crore.
This is the worst performance since the last financial crisis in the railways in the year 2000-01, which forced it to default on dividend payments to the Government. The miniscule revenue surplus is the result of a significant reduction in the amount Indian Railways has put, into its depreciation reserve fund. The depreciation reserve fund is used to replace aging assets.
The ill financial state of the railways will act as a strong impediment, to go ahead with the ambitious Rs 14 trillion investment plan, laid out in its 10 year vision released in December last year. This investment seems to be unrealistic without the public-private partnership (PPP) model in place. The PPP model would allow some part of the proposed investment to flow in, from the private sector. But, if the minister of railways continue to remain uninterested, and do not indulge in adoption of such a model to achieve the pre-determined objectives laid in the Indian Railways Vision 2020, the PSU would be left with no way of tiding over its current resource crunch.
Mamta Banerjee must ensure that she keeps away from committing the blunder that her predecessor, Laloo Prasad Yadav did. Laloo concentrated on profit and loss for the day, undermining the future balance sheet. Laloo could afford to do that because a fundamentally strong ground was established by Nitish Kumar, who considered long term profits.
In order to get back on track the railways will have to initiate radical measures to cut costs while growing freight business. The vastly increased pay scales, mandated by the Sixth Central Pay Commission, for its 1.4 million employees come in as a big burden for the PSU, especially at this stage.