Read in the context of resource generation through internal mechanisms of earnings from freight, passenger traffic and sundry sources, budgetary support from the General Exchequer and market borrowings through its arm of Indian Railways Finance Corporation (IRFC), the route to unprecedently the highest ever borrowings from the capital market is just pawning the Indian Railways to debt trap for the posterity, from which it will be difficult for the railways to come out. Through this mechanism, the railways has added rolling stock assets like locomotives, coaches and wagons valued at over Rs.60, 163 crores till March 31, 2010. At this rate, Indian Railways would be drowned under debt. This is borne out by the findings of A.C.Poulus Committee Report on Railway Finances as early as in 1994, during Narasimha Rao Government. A marginal redeeming factor is that the cost of market borrowings has come down from 15 per cent in 1996-97 to 8.21 percent in 2009-10.

Mamataa Banerjee has befooled us all by projecting the highest ever plan size budget notwithstanding the fact that there has been all round shortfall in the projected targets of freight and passenger traffic to the tune of over Rs.4000 crores, new lines, doubling, bridge works, renewal and maintenance of assets, and infrastructural growth. In fact, there has been little increase in the budgetary support, which is insignificant in view of all round increases in input costs. Despite highest ever plan size, there has been depletion by over Rs.1900 crores in the Depreciation Reserve Fund, which finances renewal and maintenance of assets and Capita Reserve Fund that triggers infrastructural growth by over two-third, falling to Rs. 5032.06 crores. This together with reduction in freight target by 20 million tonnes in 2010-11 as also in the performance of passenger traffic in the face of 8-9 per cent growth rate of national economy sounds debilitating signals for the health of rail finances.

Added to the above, projected targets of 993 million tones of freight and 6.9 per cent growth in passenger traffic with its most likely shortfall on the present parameters of economy in 2011-12 with no mention of funding of the much touted Dedicated Freight Corridor, announced with big fanfare in 2005 to link the National Capital in the west with Mumbai and in the east with Kolkata, within four years, to meet the challenges of increasing demands of ever growing economy, with no clarity on resource mobilization, building new coaches and locomotives factories, continuing dependence of passenger services on cross-subsidization from freight earnings by not increasing passenger fares for eight years in a row, and operating ratio zooming to 94.7 per cent in 2009-10 despite its projection at 92.3 per cent, continuing high freight rates constantly making the railways to lose freight traffic to other modes of transportation, suspending private participation (investment) in freight traffic modules of the Container Corporation of India, licences for which were given during Lalu Prasad regime, are matters of worries for the railways as these factors would surely affect its resource mobilization. At the current pricing, the estimated cost of Dedicated Freight Corridor has gone up to Rs.77, 000 crores compared to Rs.30,000 crores in 2005. This most important project is still mired in the problem of land acquisition and line alignments.

Meanwhile, not increasing passenger tariffs and rationalizing freight rates continue to take a heavy toll of railway finances, given high inflationary trends and increase in fuel costs especially the High Speed Diesel, of which the railways are the largest guzzlers. This boils down to one and only factors that the status of Indian Railways as a commercial entity is in jeopardy. At the current rate, the railways cannot survive as a commercial entity in the emerging globalised market economy unless the Government of India maintains a balance between the social responsibility and financial viability of this behemoth. That requires a massive infusion of additional budgetary support by the General Exchequer to the railways to remain financially sustainable.

Mamataa’s massive populist measures with a large number of new trains and a slew of new projects, especially the later ones mostly in her state of West Bengal, may not take off given the long gestation period of their fructification and the on going process of freezing such capital intensive projects by successive Railway Ministers putting them in the shelf of throw-forward pending projects by keeping them alive with meager allocation of sums in the Railway Pink Book. Such modus operandi in the manipulation of railway infrastructural projects and its finances by the Railway Ministers will never allow railways to come out unscathed on business model or even on socially responsive modules. In fact, the railways will continue to be sandwiched between financial viability and social responsibility.

Massive targets of 1300 kilometres new lines, 867 kilometres of doubling and 1017 kilometres of gauge conversion in 2011-12 sound fantastic when 2010-11 targets in these areas have not been met. For example, there has been shortfall of more than 300 kilometres in the target for new lines in 2010-11. In addition, average annual accretion of new lines has been 180 kilometres since Independence except during Lalu Prasad,’s tenancy of railways when average new lines built were 220 kilometes yearly. At this rate, Mmataa Banerjee’s accomplishments of financial targets of over Rs.1, O6, 239 crores in 2011-12 and physical targets of various projects, announced by her, and the continuing projects, remain a matter of grave concern, given the fact that 94 per cent of total earnings come from freight and passenger traffic.

The foregoing sums up worrisome financial health of Indian Railways as glimpsed through the railway budget 2011-12 documents. The railway budget is a bad economics but a bonanza for the rail passengers!