Delay in reforms
It took 69 years after Independence for India to merge the Railway Budget with the Union Budget is an indication of how difficult it can be to junk colonial-era traditions that may have outlived their utility.
Separate Railway Budget outlived its utility
In 1924, when the first Railway Budget was presented, the Railways entailed more funds than India’s expenditure on all other aspects of administration combined. So it made sense to present a separate Budget.
That equation changed long ago, and now the Railways’ outlay is just 6 per cent of the total expenditure proposed in the Union Budget for this year. In fact, revenues from the domestic aviation business are more than the Railways’ traffic earnings.
Nearly Rs.2.5 lakh crore has been planned this year as defence expenditure, but it found little mention in the Finance Minister’s Budget speech. Yet, the ritual of the Rail Budget has continued even as the economy opened up over the past 25 years.
Reason for Prolonged practice of this tradition
A key reason that it lingered so long is India’s fractured polity and the tendency of coalition partners to demand Railways as a juicy portfolio with its possibilities for populist posturing and patronage.
With the luxury of a majority in the Lok Sabha and a Railway Minister like Suresh Prabhu who has refused to use the Rail Budget as a launch pad for new trains and railway lines, the NDA has thrown its weight behind a plan that takes away the annual temptation to make the Railways a vote-magnet.
Railway Ministers will no longer need to conjure up fancy and often regurgitated promises about new, improved services for passengers without charging them the operational costs of reaching their destination.
Need for the Reform
The pressure to hold commuter fares has skewed Railways’ freight rates, year after year.
Indeed, the change is already being felt; tweaking of tariffs outside the Budget has begun. Considering the changes in coal freight and the introduction of flexible pricing on premium passenger trains, the need for a reform has been felt.
1. The Centre now needs to seriously consider setting up an independent tariff regulator to depoliticize fares.
2. New lines and trains should be determined by economic viability rather than the constituencies covered.
3. Initiatives such as demand-driven clone trains must be deployed to boost earnings, and the Rs.37,000-crore tab on social obligations, including concessional ticketing, must be borne by the exchequer.