Financial Daily from THE HINDU group of publications
Sunday, Feb 27, 2005
Logistics - Railway Budget
Lalu remains soft on rail users
Goods tariff recast; commodity groups cut to 80
New Delhi , Feb 26
IN keeping with his populist image, the Railway Minister, Mr Lalu Prasad, has yet again refrained from raising passenger fares, while marginally tinkering with the freight rate structure in his Railway Budget for 2005-06.
While the voting for the Assembly elections in his State may have been completed, it did not, however, stop Mr Lalu Prasad from persisting with his trademark `pro-poor' image, as he presented his second successive Rail Budget on Saturday.
Thus, for the third consecutive year - which includes 2003-04 when his predecessor and arch political rival, Mr Nitish Kumar, presented the budget - commuters across all segments have been spared from paying more for their travel.
What Mr Lalu Prasad has taken advantage of is the overall buoyancy in the economy. This has enabled the Railways to mop up gross traffic receipts of Rs 46,785 crore in the revised estimates for 2004-05, which is much higher than the Rs 44,902 crore that was budgeted for the year. Much of this was due to freight revenues turning out to be Rs 1,705 crore more than the budget estimate of Rs 28,745 crore, with passenger earnings too marginally exceeding the budgeted Rs 13,940 crore by Rs 95 crore.
The Rail Minister expects the current economic resurgence to sustain in the coming fiscal as well. This has perhaps emboldened him not to carry out unpopular, though probably overdue, passenger fare hikes.
Even with respect to freight, Mr Lalu Prasad has not tampered with the rates on core commodities, such as coal, cement, iron and steel, pig iron, clinker and limestone, while reducing rates on petrol and naphtha (by 4 per cent each), kerosene (3.7 per cent), liquefied petroleum gas (2.7 per cent) and milk transported in private tankers (17 per cent).
Only in iron ore meant for exports, he has resorted to a 14-per cent increase. This, however, does not apply to ore supplied to steel plants.
Freight rate on foodgrains has been hiked 33 per cent, but the hike does not extend to rice and wheat meant for the public distribution system (PDS) or poverty alleviation programmes.
There has also been a rationalisation of freight classification, including charging lightweight commodities such as paper, timber and motor vehicles, on a full wagon carrying capacity basis (against the current system of charging according to actual weight loaded).
Mr Lalu Prasad has introduced a `premium registration scheme', which will give users an option to fork out extra for obtaining priority in freight movement for their commodity. Again, the assumption is that the Railways would confront a high freight demand, which would help boost revenues in the coming fiscal.
On the whole, the freight rate increase and rationalisation measures are budgeted to yield Rs 650 crore in additional resource mobilisation for the Railways in the coming fiscal. Of this, roughly 70 per cent would come from freight increase in non-PDS grains and iron ore and the remaining from the premium registration scheme.
The Railways' gross traffic receipts for 2005-06 are expected to go up 8.9 per cent to Rs 50,968 crore, with freight earnings rising 9.9 per cent (Rs 33,480 crore) and passenger revenues 7.4 per cent (Rs 15,080 crore).
With ordinary working expenses rising 7 per cent to Rs 35,600 crore and appropriations made to the Depreciation Reserve Fund (DRF) and the Pension Fund, along with various miscellaneous receipts, the Railways would be left with a net revenue of Rs 5,913.98 crore in 2005-06 (against the revised estimate of Rs 5,300.88 crore for the current fiscal).
In fact, one count on which Mr Lalu Prasad sought to take credit was the discernable improvement in the operating ratio of the Railways to 91.2 per cent in 2004-05 and 90.8 per cent budgeted for 2005-06. This was possible despite an "unprecedented appropriation" of Rs 3,604 crore to the DRF being made in the coming fiscal against Rs 2,662 crore in 2004-05.
Stating that the expected operating ratio was the lowest in eight years, The Rail Minister said he would bring down the same to less than 85 per cent in the coming years "through strict control on ordinary working expenses."
Mr Lalu Prasad proposed 46 new trains and the extension of routes for 27 existing trains.
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