A POTENTIALLY INFLATIONARY RAIL BUDGET TOWARDS MORE AGGRESSIVE PRIVATISATION
Abhijit Mukhopadhyay currently works as an Economist at Economic Research Foundation, New Delhi. He taught at business schools and also worked at different research based institutes in New Delhi.
Even before the railway budget is tabled in the parliament, the Ministry of Railways of the new government at the centre dealt a blow to the common people by announcing a 14.2 per cent increase in passenger fares and 6.5 per cent rise in freight rates. The previous government had decided to hike fares from May 20, but its implementation was stayed because the announcement was made on the same day as declaration of election results. However, the new government wasted no time and immediately implemented this particular decision last month. When the Railway Budget had to be tabled within a few days, this decision of increasing passenger and freight fares indicates a break in convention and an attempt to avoid discussion in parliament. Apart from that, this decision is also expected to fuel inflation naturally.
In the Railway Budget, there is another interesting twist in this tale. The budget says that passenger fares will be periodically raised as per new tariff policy linked to fuel price. The petrol prices are now substantially market determined, after effectively building a near-consensus (in both Congress and the BJP) to increase diesel prices by 50 paise every month. The new government has done its bit by increasing diesel prices by 50 paise and petrol prices by Rs. 1.69 in the second month of its existence itself. So, essentially the fuel prices will increase; very strangely they seldom decrease even when international oil prices decrease. And now the passenger fares are linked to oil prices. So, now if there is an increase in oil prices then definitely there will always be a chance of passenger fares increasing. This is not quite “acche din” promised for the common man.
Apart from going through the mundane processes of introducing new trains and making other constructive promises, this budget also charts into a new territory when it says that resource mobilisation will be done through leveraging PSU resources, Foreign Direct Investment and Public Private Participation. Outsourcing many services and facilities related to railways was already initiated from the Lalu Prasad days, but inviting foreign players is the new innovation. Soon we may see disappearance of small local vendors and instead there may be big business running their facilities from different railways establishments – with a possibility of monopolising certain products. It is quite possible that the 5 rupee somosa-wala or the 4-rupee chaiwala may disappear from the railway platform (in the regime of a so-called “chaiwala” PM). One can only hope that essential services like providing clean drinking waters will not be indiscriminately privatised.
Mr. Sadananda Gowda also proposed Rs. 11,790 crore market borrowing on top of all these – a distinct signal to show that the government is no more interested in funding the biggest transport and freight facility of the country which affect lives of millions of people of the country.
There is also an effort to emulate Vajpayee in announcing Diamond Quadrilateral network to connect major metros through High Speed Rails. Let us see how this ambitious project pans out. There is also a bit of Modi touch in tech-savvy measures like status of on-going projects to be made available online, making wi-fi facilities available and other such facilities. If implemented – these services can add value, but the common ailments of the railways basic services are much more prevalent. On-time running of the trains, maintaining hygiene in coaches and the platforms, ensuring passenger and freight safety and security are more pressing problems than the cutting-edge technological issues. Even today lack of affordable public transport remains the main problem in most parts of India. Those who can pay have other avenues to travel, but those who have no other option are the common people. The direction of this budget does not seem to be oriented to this mass of common men and women.
However, the proposals to run bullet trains do not seem to be practical in the present context. Apart from the acute lack of infrastructure to run trains at 350 km per hour, huge costs are involved in this endeavour. For resource mobilisation the public private partnership (PPP) model has been cited several times in the budget speech, but the lukewarm historical private sector response of funding in such heavy infrastructure projects makes this proposal look suspect from the implementation point of view. If at all proposals like these are implemented with PPP model, then the fares will be so high that only very high-end customers will get benefitted. In any case, this bunch of customers can always fly. So, these proposals may have some gloss value but definitely the “aam aaadmi” is not going to get any benefits out of these.
The common men and women of the country probably got enthused when the Railway Minister started his speech by quoting Kautilya – “In the happiness of the people, lies the ruler’s happiness.” But the enthusiasm was short-lived and the realisation of hard days ahead came into existence – instead of “good days” – when the real intention and direction of the budget became evident. No wonder that some of the commentators are calling this regime UPA-III, albeit jokingly. But seriously, this regime till now is repeating the same set of policies with more vigour, for which the earlier UPA government was completely alienated from the people of this country.