#RailBudget: Can Suresh Prabhu pull off a Manmohan Singh 1991?

Can Suresh Prabhu be the Manmohan Singh of 1991 for Indian Railways?

This question is less relevant to Union finance minister Arun Jaitley as his train has to arrive at certain destinations, whereas Prabhu is standing on the same podium where Manmohan Singh stood in 1991.

And railways, too, stands at a juncture where the Indian economy stood in 1991.

Just as there was no alternative for the Indian economy except to march forward on a radical path in 1991, Prabhu also has no option of keeping railways in status quo. Comparing the state of railways to that of the Indian economy of 1991 makes it easier and contextual to understand its emergency and the opportunity that Prabhu has got.

In 1991, India was a competition-free, financially dilapidated and state-controlled country where entry for new technology and quick change were prohibited. This outdated structure had hobbled the economy on the domestic as well as international fronts. The railways, too, is similarly crippled today.  

It is important to dig up some data here.

Carrying goods and passengers is the main business of the railways. The market for both transports is rising with increase in people's income and growth of the economy. However, the share of railways in the transport market fell in 2012 to 30 per cent from 56 per cent in 1990. Over the last three decades, the share of Railways in goods transport has fallen from 62 per cent to 36 per cent, while in passenger transport from 28 to 14 per cent.

According to a fresh report of Axis Direct Research, the Indian Railways spends 54 paisa per kilometre to earn 26 paisa. Compared to this, the Chinese Railways earns 63 per cent more revenue.

By constantly increasing freight charges to compensate for deficit, the railways has vitally evicted itself out of the goods transport business.

Despite demand for passenger and goods transport, the railways has not been able to extend its network over the last 20 years. Indian Railways happens to be the slowest in the world as the average speed of a goods train is 25 km per hour and that of passenger trains 70kmph.

As much as 91 per cent of its total income goes into salaries and allowances, interest on loans and on running it in an old fashioned way. Its entire structure is creaking in the absence of modernisation, leading to the world's highest rate of accidents.

If the railways was a company, investors would have surely dissociated themselves from it, declaring it bankrupt. That is why Prabhu's efforts to fetch loans at the time he joined bore no fruit. At present, he is working on obtaining loans from PSU insurer Life Insurance Corporation of India. In 1991, reforms in the Indian economy began with extensive reorganisation and the launch of some medium to long term measures, which took years in making and unmaking. In this regard, Prabhu is luckier than Manmohan Singh. He already has a well articulated agenda for Railway's reforms and knows what has to be done according to what priority.

The greatest of railways' immediate needs is to reduce pressure on its network. If a minister really wants to be known as a reformer, he should leave everything aside to go full blast after a single project: the development of a Dedicated Freight Corridor (DFC) each between Mumbai and Delhi (1,500km) and between Ludhiana and Kolkata (1,800km).

This will change the entire picture of goods transport by rail. For the two corridors, 90 per cent and 75 per cent land respectively has been acquired. Financial assistance from Japan and World Bank, too, has been assured.

Admittedly, DFC would be a goods transport project, but its real benefit will accrue to passenger transport as well. As soon as the DFC is in place the entire goods train network will be passed on to this corridor. That will help the railways to spare its tracks for passenger trains, increasing train speed and introducing new trains. The DFC should get the same priority in this government that the road projects got under the Vajpayee government.

The existing rail network, beyond DFC, needs even more resources. Indian Railways is the largest transport company in the world, which is impossible to run on loans. If Prabhu is really courageous, then this budget can be a great opportunity for reorganising the railways.

The way Manmohan Singh had brought India into the ranks of modern countries by deregulating the rupee at one go in 1991, Prabhu can demolish the old structure of railways embarking on a journey of making it a modern railway company. A company that provides excellent service at the right price, not a company that runs schools, dispensaries and manufactures wheels and axels.

The reorganisation of railways is the only way to rescue it and to pave the way for the privatisation of its manufacturing business and the sale of its properties. This will generate resources for the railways to modernise its network.

If the railways minister so desires, he can waste another budget by further squeezing freight charges and announcing token passenger amenities. Alternatively, he has the option to be revolutionary.

The railways is India's largest transport system. Resource-crunch is not as big a hurdle as indecision and the orthodoxy of leaders heading it. The 2016 rail budget will not be judged on its content but on Suresh Prabhu's courage (or, the lack of it).