Railways goods traffic needs a big push

THE Finance Minister’s Interim Budget speech held forth at some length on the priority and importance given to the Railways. It is necessary to examine what can be achieved by the new initiatives mentioned and what are the key issues that need to be addressed to put the Railways on the fast track, so to speak.

The fourth-largest national railway system in the world, with 12 lakh employees, it is the main carrier of middle- or long-distance passenger traffic. On goods traffic, which is its main profitable operation, it has, over the years, been losing ground to road haulage.

A key announcement in the Budget is the decision to build three new railway corridors for energy, minerals and cement and port connectivity. These will be focused to take care of high-density traffic. The beneficial impact should be to improve the logistical efficiency, which should lead to a cut in costs. More space for goods traffic will mean easing up space for passenger trains and the new goal is to take the total passenger carriage in a year to 10 billion from the current eight billion, eliminating waiting lists in the process.

The Budget for 2024-25 projects an 8 per cent rise in revenue. Capital expenditure is set to go up by 5 per cent, the vast majority of it (95 per cent) coming from government budgetary support, with internal and extra budgetary resources contributing the rest.

How profitable are the railway operations? Currently, a mere 1.1 per cent of the capital outlay comes from internal resources. The more surplus the organisation is able to generate, the greater will be its ability to go forward and expand on its own steam.

A major measure of profitability is the operating ratio, which tells us how much of its revenue goes to meet ordinary working expenses. In the 2023-24 financial year, the operating ratio worked out to 98.7 per cent, that is nearly Rs 99 out of the 100 earned went into simply keeping the organisation going. This is in sharp contrast to the ratio being 90.8 a decade ago.

While looking for numbers on the Railways among the current Budget papers, those who have been studying the organisation for years feel that a disservice was done to it by merging its budget with the general Budget. The result is that now there are no separate railway budget papers. Numbers on the Railways have to be fished out from among the general Budget documents. Plus, without there being a separate railway budget, the organisation has lost some of its earlier high profile. So, the discussion on the Railways is less data-driven.

The main reason for the deterioration in the Railways finance is the rise in outgo on account of pay and pensions, which has been necessitated by the award of the Finance Commission. The obvious answer to this is that the productivity of both hardware and humans has to improve so that the organisation can earn more while spending the same amount.

This is best achieved by taking goods traffic, the profitable part of the business that subsidises passenger traffic, fast forward. The new corridors planned will decongest tracks, enabling traffic to move faster and making it more attractive for businesses to consider sending goods by rail.

We are familiar with several dedicated freight corridors already being implemented and made operational in parts. How will the new ones announced differ from those already being constructed? For example, when the corridors for energy, minerals and cement come up, will these items stop being carried on the freight corridors? If not, why call them by different names?

Till now, we have only talked about goods carriage, but the Budget has something for passenger traffic, too. For example, 40,000 regular rail bogies will be upgraded to Vande Bharat standards so as to increase safety and passenger comfort. But is that a big thing to talk about in the Budget? In fact, a lot of the noise coming out of the government on what new and better things it is doing focuses around Vande Bharat and high-speed trains. These are showpieces which can be used as frills in the publicity effort but the focus should unashamedly be on improving and having more of the plain old unreserved carriages by which alone most Indians can afford to travel.

There is a need to pay sufficient attention to improving the bread-and-butter operations, one part of which is delivering more uncongested and uncrowded passenger travel. The other and highly important part must to be to organise door-to-door delivery of parcels, both small and large, so that businesses feel it is cheaper and quicker to use rail instead of road haulage for transporting items, ranging from washing machines to motor cars.

All this requires a proactive management. But there is a somewhat new problem here. The management structure, which was refashioned in 2022, has still not settled down. In a major change then, all eight administrative officers’ cadres, like those for traffic and engineering, were merged and a single Indian Railway Management Service (IRMS) created. This was done to put an end to what was till then a bane,’departmentalism’, because of which members of a particular cadre running a department thought only in terms of that department and not the Railways as a whole. Now, an IRMS probationer can be posted in any department and be transferred to any other one later.

In the first year, those senior officers who were asked to apply for inclusion in the service were told to list what they considered to be their achievements. They naturally beat their own drums as much as they could. The selection that eventually emerged was widely found to be unsatisfactory. Some with inadequate experience were chosen. For example, general managers who had not earlier served as divisional railway managers failed to command respect down the line. There was a sense of demotivation all round.

Thereafter, members of the IRSM were selected through the UPSC as part of the same process that selects IAS probationers. The flaw was that a successful probationer earmarked for the Railways did not know where he was going to be posted. The upshot of all this was that only those in the bottom half of the merit list ended up in the IRMS. Earlier, the Railways got some of the best engineers. Over time, this can only adversely affect the functioning and planning in the Railways.