Indian Railways has been a loss-making organisation for a long time now. In the year 2012-2013, it reported losses of Rs 24,915 crore.
The Government has announced a hike in passenger and freight charges in railways and this announcement is greeted by shrill cries of ‘bure din aaye hain’. It is indeed unfortunate that the very first announcement from the Modi Government is that of a hike. The nation is already reeling under a decade of consistently increasing inflation and the greatest hope that citizens have from this Government is controlled prices and prosperity. But before getting disappointed with the new Government and regretting the overwhelming majority with which Modi was elected, it would be wise to understand the context of this hike.
Indian Railways has been a loss-making organisation for a long time now. In the year 2012-2013, it reported losses of $4.53 billion dollars. Converting this amount into Rupees, at a rate of one dollar = Rs 55, the losses work out to a whopping Rs 24,915 crore.
For a decade, passenger and freight fares of the Railways have been kept at mostly the same level. There have been a couple of small upward revisions. The real revision was proposed by Dinesh Trivedi (who had succeeded Mamata Banerjee as the Railway Minister) but in the hue and cry that followed, Trivedi had to resign and the hike was rolled back. (Reportedly, this fare revision was planned by UPA II. It was on the cards for a rollout but on election result day, they rolled it back).
UPA I and UPA II were both coalition Governments. The Ministry of Railways was given as a sop to coalition partners in exchange for their alliance. In this background, neither the majority party nor the allies were willing to rock the boat. As a result, capping railway charges became a populist measure of the Government’s people-worthiness. However, this proved very costly to the public exchequer because the losses were borne by the Centre with funds coming from taxes and borrowings. This added to the deficit funding. For years now, India has been borrowing heavily to meet national expenses. (It is a completely different matter that the money stashed away in Swiss Banks and the monies salted away via scams could have funded the nation in its entirety and India would have had no international debts.).
Railways are a high expense for the Government even if just infrastructure and maintenance is taken into account. New routes add to the financial burden. The power required to run trains is one more highly expensive element of running railways. While this hike may not bring in profits for Railways or even help it break even, it will certainly reduce the staggering losses that the department reports each and every year.
Given the huge losses Indian Railways is making, there were two options — one was privatisation of railways and the second was to try and make it break even. Privatisation, or inviting Foreign Direct Investment (FDI) into essential services like Railways (and Post and Telegraph) would be almost like handing over the country to private companies (foreigners, at that). Even if the Government is considering this option, they should drop it immediately.
The second option was an upward revision of fares to reduce the losses. This was by far the better option. If asked whether they would like to be in debt or whether they would like to help create a stronger and more independent nation, every individual of the country would unhesitatingly select the latter option. This hike is towards the same end as the latter option.
If the Government chooses to invite private players into Railways, the outcome would still be an upward revision of fare. Only it would be even more because private companies would look for sizable returns and profits against their investment. It is only as long as Railways in a public sector undertaking that it will remain affordable and the first choice of people. This fare hike is a small price to pay for the convenience that railways offer.
