Given her penchant for populist measures not increasing passenger fare, the Railway Minister may resort to dynamic pricing policy since introduced by her immediate predecessor Lalu Prasad of revising freight rates in order to keep the railways financially viable as she would like to resist the temptation to increase market borrowings further fearing debt trapping of Indian Railways.

Meanwhile, financial health of the railways is in doldrums. It is almost on the brink! A budget eve appraisal of the operating ratio of Indian Railways, which is an indicator of financial health of the behemoth, indicates that it has crossed 95 per cent in the current fiscal year (2010-11) compared to 94 per cent in 2009-10, which means the railways spend over 95 paise out of every rupee that it earns. This reveals that the railways is facing acute financial crunch. This slide in operating ratio is from Lalu Prasad’s peak of operating ratio of 74 per cent, indicating unprecedented financial turn around of Indian Railways, the advantages of which have been wiped out by high inflation resulting in all round increase in input cost and absorption of the impact of recommendations of the Sixth Central Pay Commission Report, increasing pay and perks of the employees substantially like never before.

According to official sources in the Ministry of Railways, passenger and freight earnings constitute around 94 per cent of the traffic earnings. Keeping this in consideration, there has been shortfall in the gross traffic earnings against the annual targets since 2008-09 consecutively. Compared to the gross traffic receipt target of Rs.82, 393 crores in 2008-09, the actual gross traffic receipts were Rs.79, 861.85 crores. Reasons included shortfall in goods earnings, sundry earnings, other coach earnings and passenger earnings. Similarly, against the revised estimates of gross traffic receipts of Rs.88, 355.91 crores for 2009-10, the gross traffic was below the targets. AT the continuing shortfalls in the consecutive gross traffic receipts from the annual targets, the targeted gross traffic receipts of Rs.94,764.95 crores set for the current financial year 2010-11 on account of unforeseen increase in input costs in the rail services to the nation despite the railways having increased capacity additional coaches, reduction in wagon turn around time, rationalization of freight structure and goods traffic, enhanced carrying capacity of 8-wheeler Broad Gauge wagon by six tonnes, introduction of dynamic pricing policy covering busy season charges on transportation of goods during April-June and October-March, congestion charge of 20 per cent on goods transported to Bangladesh and Pakistan to generate additional revenue earnings.

Added to the above, based on the thrust of the Annual Plan of Rs.41, 426 crores for the current fiscal year 2010-11, on construction of new lines, gauge conversion, doubling, acquisition of rolling stock, track renewals, bridge works, signaling and telecom works, computerization, electrification, staff quarters, amenities for staff, and railway research in comparison of 2009-10 Annual Plan performance, the targets may not be achieved. All round increase in input costs, high inflation and depletion in freight and passenger traffic, especially in high rated commodities have taken a heavy toll of railways gross traffic earnings.

The result has been, the railways are left with no option but to increase freight and passenger fares to remain financially viable unless the Government of India infuses additional budgetary support of about Rs.50, 000 crores. So Mamtaa Banerjee’s ambitious populist plans are in danger of going haywire (phut) unless the General Exchequer pumps in massive resources!