Railway’s Privatisation at the Cost of Neglect of Infrastructure Strengthening and Development


Vice Predisent – Dakshin Railway Employees Union (DREU)

The analysis of various rail budgets shows that Indian Railways have not been provided funds required for renewal and expansion year after year.

The analysis of various rail budgets shows that Indian Railways have not been provided funds required for renewal and expansion year after year. Even Nirmala Sitharaman’s so called budget with infrastructure thrust is a myth and if one goes through the fine prints and compare with the past budgets, one comes across many revelations.

Under-investment in Railways
As for as the rail infrastructure is concerned it has been under-invested and under total neglect either with regard to the renewal of existing assets or augmentation of existing capacity. Mr. Suresh Prabhakar Prabhu as the then Minister of Railways in his budget speech for 2015-16 announced that the infrastructure has been neglected very badly and needs to be strengthened and expanded in order to increase the average speed of goods trains from 25 kmph to 50 kmph and of passenger trains from 50 kmph to 80 kmph and to attain 95% punctuality. He also stated that railway’s share of freight in the country must be increased from 29%% to 45%.
Mr Prabhu reported in his white paper on railways that there were 5,300 kms of track arrears for renewal which is the main cause of derailments and accidents. According to the paper, 4,500 kms of track becomes due for renewal every year but only 2,500 to 3,000 kms are renewed every year. He, after winding up the 12th five- year plan midway, announced a plan for 2015-2019 with an out lay of 8.56 lakh crore rupees to fulfil the above objectives. Accordingly, every year starting 2015-16 Rs 1.71 lakh crores should have been spent. But the following were the ‘Actuals’ as per the budget documents:

After the merger of the rail budget with General Budget since 2017-18, Mr. Arun Jaitely became the custodian of railways and continued to under-spend. After the Interim Budget by Piyush Goel before 2019 parliament election in July 2019, Nirmala Sitharaman as the finance minister announced in that budget that railways need an investment of 50 lakh crore rupees during 2018-30, i.e., during 12 years Rs. 4 lakh crores rupees every year. But in 2019-20, the actual money spent was only Rs. 1.48 lakh crores.
She did not present the honest appraisal of 2015-19 plan of Rs. 8.56 lakh crore investment out of which only Rs. 5.86 lakh crores had been spent in these five years. Even this figure can not to be relied upon as it is not possible to verify the Extra Budgetary Support figures. Especially for the investments through PPP, there is no record to check the figure.
In the 2020-21 budget speech, she announced that the goal is to create a National Infrastructure Pipeline (NIP), as announced by the PM Narendra Modi in the Independence Day speech. In the budget speech she said it is for 5 years. But the NIP published by the finance ministry on 31st December 2019 proposed 103 lakh crore rupees plan over 6 years for all infrastructures. According to the NIP, the Railways plan is for Rs. 13.69 lakh crore. As the private sector is not forth coming for investment in rail infrastructure despite many concessions given to them, the NIP envisaged 87% of this fund, i.e., Rs 11.90 lakh crore to be invested by the central government through general budget support. But for road sector centre will invest only 25% according to NIP.
The following are the year wise total plan requirements, along with the budgeted plan outlay, in Rs. Cr:

The budget support includes Rs. 13,000 crores road safety fund collected from road cess on diesel and transferred to railways for rail safety fund and Rs. 5,000 crore committed by the central government for the National Rail Safety Fund. If this Rs. 18,000 crore are deducted from the above budget support, it would mean far less for NIP than the 87% commitment. It is well understood that the NIP is still only half way through.
But Nirmala Sitharaman in the budget 2021-22 has abandoned the NIP and has proposed an NRP, National Rail Plan, to be executed in 30 years, between 2021-51 with an investment of Rs 38.5 lakh crore. Astonishingly, the objectives are the same as proposed in 2015-16: to increase the freight share from 26% to 45%; to increase the average speed of goods trains to 50 kmph from 25 kmph and passenger trains from 50 kmph to 130-160kmph. Even the track renewal arrears have not been wiped out. At present there are 11000 kms track renewal arrears. No increase in the physical output of new lines, doubling of lines, etc. has been proposed. The following table shows how there has been no specific improvement despite these mega announcements.

For the fiscal 2021-22 the capex of Rs. 1.07 lakh crores has been budgeted which is widely appreciated. There is another revelation too. For the current fiscal the revised estimate of Rs 29,000 crores is Rs 41000 crores less than the budget estimate of Rs 70,250 crores. If it is to be made good in 2021-22, the additional amount of Rs 60000 crores is required so the provision of Rs. 1.07 lakh crore is far less than the past allocations. Apart from this, Rs 18,000 crores is to be put aside for rail safety fund. Where is the extra effort for the proposed NRP? For 2021-26 an amount of Rs 5,81,821 crores out of Rs. 38.5 lakh crores, which is to be spent, i.e., Rs. 1,17,364 crores annually.
Even the safety targets have not been met by them. After lot of derailments and accident deaths, a National Rail Safety Fund was proposed, named Rashtriya Rail Sanrakshana Kosh (RRSK). Rs 1 lakh crore has to be spent in 5 years i.e. Rs. 20,000 crores a year starting from 2017-18. According to the CAG, this is a fund created from the same existing railway funds like rail safety fund obtained from Diesel cess out of which the share of railways is Rs. 10,000 crores; Rs. 5,000 crores comes from the Depreciation fund of railways. Both have been part of railway sources. Only infusion of Rs. 5,000 crore from general budget support is required. This fund has to be used for renewal of existing assets like track renewal, signal renewal, bridge repair, etc. But even this target was not met. According to the CAG report and the budget documents, the following were the actual expenditure met by RRSK in place of Rs. 20,000 crores each year:

Operating Ratio – Claimed vs Actual
The next revelation is about the unprecedented adverse operating ratio which has not been highlighted in the overview of railway receipt and expenditure. The Operating Ratio (OR) is the percentage of expenditure on the income. The overview of the railway receipt and expenditure shows that the OR in 2019-20 was 98.36 % and 2020-21 as 96.96%, as per the revised estimate (RE). A question arises as to how when the Gross Traffic Receipt is Rs. 79,304 cr less in the revised budget from the budget estimate, almost the same OR is possible in the revised budget. She has shown Rs. 75,604 crore less in the expenditure. Surprisingly, she has shown the pension appropriation as only Rs. 523 cr as against the budget estimate of Rs. 53,160 cr. For 2019-20 also the actual appropriation on pension is shown as Rs. 20,708 cr. When we go in to the Demands for Grants presented for voting in the budget 2021-22, the actual for 2019-20 is shown as Rs 52,712 cr as against Rs 20,708 shown in the overview. Revised estimate for 2020-21 is shown as Rs. 54,766 cr as against Rs. 523 cr in the overview. The cat is out of the bag in the footnote of the overview. According to the footnote, the real OR for 2019-20 is114.19 and for 2020-21 it is131.49.:
“Due to Covid related resource gap, Railway appropriated/estimated to appropriate less than required amount to Pension Fund in 2019-20 and RE 2020-21. With required level to appropriation to Pension fund from Railway Revenues in Actuals 2019-20 and in RE 2020-21, the Operating Ratio would be 114.19% and 131.49% respectively.”

Railway Finances
Therefore, railway finances are in bad condition and they cannot create resources for the large-scale investment needed to NIP or NRP. As planned in the NIP, 87% FUND HAS TO COME FROM THE GENERAL BUDGET SUPPORT. Then only the infrastructure can be strengthened for safety and expanded to meet the growing demand. As per the CAG report, the proposed LIC loan of Rs. 1.5 lakh cr did not come through as IRDA has restrictive investment regulation. In the last 4 years, only Rs. 16,200 cr came from LIC. The RAILWAY HAD TO TAKE SHORT TERM MARKET LOAN OF Rs. 49000 cr at a higher rate of interest.
As seen from the experience, this government has been neglecting the investment and the infrastructure development has been very badly affected. The NRP also says that private sector will not come for investment in infrastructure. It also says that government also does not have money to invest. China invests 11 times we invest. Their speed is 350+kmph for goods and 400 kmph for passenger trains because the government invests in railways.

Push to Privatisation will worsen railway finances
While neglecting the infrastructure development as per NIP, the government implements only its privatisation recommendations.150 passenger trains are to be privatised by march 2023 and 500 trains by 2025. By 2025, 30% goods trains are to be privatised. The NRP says by 2031 there will not be any goods trains run by Indian Railways run and the entire goods traffic will be privatised. 90 important stations have been listed in NRP for privatisation before 2031. Dedicated Freight Corridor also will be opened for private sector. Nirmala Sitharaman has announced in the budget that even the Dedicated Freight Corridor corporation will be monetised and disinvested and handed over to private when it becomes operational. Already Container Corporation is listed for strategic sale. It will be sold in 2021-22 as per the budget announcement.
Railway is cross subsidising passenger loss by earnings from goods traffic. As per the CAG report, in 2018-19 railway incurred a loss in passenger segment of Rs. 46,000 cr. It earned a profit of Rs. 45,900 cr in goods segment. It cross subsidised the passenger loss.
In UK and Russia, the central government meets the passenger loss according to NRP. In the absence of government subsidy and if the goods trains go to private sector, the railway will not be able to give passenger subsidy. It will not be able to pay salary and pension. The NRP says only the loss-making second class passenger segment will be with railways. Therefore, all profit will go to private sector and loss to government. Finally, the infrastructure development will face serious problems. Privatisation will be at the cost of neglect of infrastructure development.
Nirmala Sitharaman has shown in the budget that there will be 14.4% nominal GDP growth in 2021- 22. Railways’ targets do not match this. A perusal of the Statement of Railway Receipts and Expenditure available in the railway website shows that even the level of 2019-20 is not expected in terms of the net tonne-kilometers. According to the statement, the goods traffic is expected to grow a meagre 1.03% over 2019-20 and passenger traffic 4.6%. Even these figures are not reliable when we do the comparison with fuel expenses. Without fuel trains won’t run, is a common knowledge. The fuel expenditure will be only 82% of 2019-20, mere Rs. 12,00 cr more than the revised estimate of 2020-21, the pandemic period.

Preparation for privatisation by unprofitable passenger services
As for as passenger trains are concerned Railways are not interested in running all the trains scheduled in the time table. Now they are running only 60% of the trains according to the railway minister. They call them cloning express. Though they are the regular trains, they are not called by their name and number. They have simply removed the first number of the regular train, added 0 in its place and called them special trains. They are using the pandemic as an opportunity to run only profitable trains. They are preparing for the scenario of privatisation of goods and passenger trains.
If private passenger trains have to run in the existing congested routes in the scenario of neglect of strengthening and expansion of rail network, all the time tabled trains cannot run if a level playing field to the private operators is to be provided. One of the conditions for private trains is that there should not be any IR train one hour before and after their trains, not even from another terminal. That is why railway do not intend to operate all the passenger trains. Therefore, expectedly fuel expenditure will be far less than that of revised level of pandemic period.
Railway also do not intend to run suburban trains at the level of 2019-20 as the loss in this segment is Rs. 6,000 cr. They don’t want to add general compartments either. As per the NRP, the British passenger segment losses are met by the respective governments even though most of the British passenger segment is with private. There is a saying in Indian Railways that as we increase the passenger service, so the loss will increase. As the government feels that the user must pay, they fleece the reduced passengers to meet the loss. Extract the maximum from the minimum is the philosophy. They have abandoned the philosophy of social service obligation. In these special trains, the fare is more and there are no concessions for senior citizen, patients, youth, journalist, kisans, etc. They are virtually preparing the ground for privatisation of railways’ goods and passenger trains.

Railway unions should unite the workers and go to people for bigger struggles along with people to save railways and the nation.



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