Indian Railways Financial Meltdown

Indian Railways Financial Meltdown: When Dinesh Trivedi, ex-minister, announced that the Indian Railways was in ICU, it did not come as a surprise to the nation. Ever since the publication of the White Paper on Indian Railways and bringing to lime light its faulty findings, it was clear that the railways internal structure had crumbled down. The foremost cause was the coming of the new incumbent who remained in office during 2009-11 and who actually had no time to think about the railways. She was preoccupied with West Bengal affairs and the PM also gave her free hand to rule the railways. He never tried to correct her when she was wrong. This non-interference was meaningful – it was coalition compulsion – the theory which was meant to degenerate Indian governance from its very roots. Lalu Prasad left the railways with much hyped achievement of turnaround. He had set high benchmark for the new comer - Mamata Banerjee. She therefore issued White Paper so that her achievements should not be compared with her predecessor as and when she might leave the office. She was sure that her real place was in West Bengal and she did not waste time to attend Rail Bhavan regularly. When the cat is away mice play. The railways thus started deteriorating and she could manage the lowest cash balance in the history of the Indian Railways – a paltry sum of Rs. 75 Lakh only in the first year of her stewardship. The book, very courageously and passionately written by Dr.R.N.Misra, is an exhaustive critique of White Paper on Indian Railways and exposes the reality behind the nature and causes of the railways crises regarding finances and management and presents a diagnostic analysis of the syndrome relating to their meltdown and failing health. It contains 12 chapters including conclusion. Starting from Turnaround to White Paper and gradually covering details of the White Paper as a flawed report, it goes on analyzing financial and managerial syndrome and pointing out that the railways need reforms not White Paper. It also includes the drama of Roll Back or Resign – played at Rail Bhavan, directed through a remote control by the party chief with the role of a tragic hero played by Dinesh Trivedi who ultimately surrendered to the wishes of the director. The whole nation silently witnessed this perfect Shakespearian tragedy with political catharsis of a high order. The book is worth reading by people in general and the railways staff, the workers and the policy makers in particular.

Trinmool Tenure Proved to be Disastrous for the Indian Railways

Trinamool Tenure Proved Disastrous for the Railways The last three years, 2009-10 to 2011-12, seemed to be a desperate attempt by the railways ministers belonging to Trinamool Congress – Mamata Banerjee, Dinesh Trivedi and Mukul Roy – to channelize and divert the activities of the monolith from its basic business of transportation to route its resources to their home state – West Bengal. Their attempt could not succeed much but the railways suffered a lot due to such diversions and many ad hoc schemes got preference over the planned activities of the railways. The non-planned projects such as opening of medical colleges and nursing schools and MoU signed between the ministry of health and the railways and also between human resource development minister and the railways were the clear indications of diversifying the railways resources to non-core activities to slow their pace of development. There were many irrelevant committees set up under Trinamool tenure for providing advice or consultation. They seem to be of no use in the present context and better if they are scrapped. The railway ministry had provided solid support to Trinamool Congress in establishing railway based projects in West Bengal. The West Bengal is best connected by the railways with 4151.98 km of railways tracks of which 2227.3 km run on electricity. A new railway link from West Bengal to Sikkim has been proposed. A new rail axle manufacturing factory has been finally set up at Jalpaiguri for Box N wagons. An AC Container and Bogie manufacturing factory has been established at Budge Budge (near Kolkata). It is all “advantage west Bengal” because Trinamool Congress chief has strived hard to retain the railways portfolio with her. With the withdrawal of support by Mamata Banerjee, she now fears that West Bengal railway projects may die their slow death. The trio of Trinamool Congress have added railway projects worth Rs. 65000 crore to West Bengal. Besides 17 major projects including the EMU coach factory, wagon manufacturing and electric loco assembling units and East West Metro in Kolkata, worth Rs.40,000 crore, Ms. Banerjee as railway minister and her two successor s had cleared 63 schemes relating to construction of new lines, gauge conversion and doubling of tracks worth Rs. 25000 crore. This has been perhaps the most uneven distribution of railway related projects after Independence. It has been all “advantage Mamata” as if no other leader exists in this country. Is this the way to fight for the cause of the common man when she herself keeps the lion’s share of the booty depriving rest of the states for their stake in railways? However, as far the core activities of the railways were concerned, the years 2010, 2011, 2012 were the years of great neglect. These years have shown remarkably high political impact on the railways and have degenerated their functioning at all the levels. The railway politics has made it possible to divert various railway related schemes to West Bengal and syphon off the funds for using them in their completion. Mamata Banerjee issued White Paper (2009) on Indian railways; it was a negative approach which led her to prepare budget estimates by fixing traffic targets at a lower level. She pursued benchmarks much below than the business-as-usual practice which ultimately brought the railways to financial meltdown. When she took over the charge in May 2009, the first step she took was to terminate the process of turnaround. This disturbed the financial progressive ways and tempo of the railways working which was meticulously adopted by the earlier regime. Once you disturb the rhythm and the momentum, it is hard to regain it. It was this reason that she could earn all time lowest surplus in her first year as a minister and was never able to reach nearer the earlier figures. She started to reduce budget estimates out of intrinsic fear that she might not achieve higher targets. She was not ready to put up a fight against the forces hindering the growth and take the railways on the fast track. This pushed railways in back gear, and fund balances started declining much faster than the revenue earned. Three main budget studies may be cited as examples of such a deteriorating condition. The main railway budget 2009-10 has shown that a deliberate effort was made for a final showdown to the cause of turnaround and in doing so the estimates of almost all the head of items were reduced. Two years later, when actual performance of the year 2009-10 came to light, all the estimates (budgeted and revised) were reduced to a terrible state. There was no surplus/excess generated worth mentioning. The railways could earn only 0.75 crore net revenue as against an estimated figures of Rs. 2642.26 crore. This increased the operating ratio to the tune of 95.3 per cent. In this way, railways cash reserves fell from Rs. 13431 crore to Rs. 75 lakh. The minister of this period – 2009-10 – literally left the railways in a state of financial meltdown as from Rs.13431 crore in 2008, their cash reserves fell to a paltry sum of Rs. 0.75 crore or Rs. 75 lakh in 2011. This means between 2008 and 2011 the railways lost a whopping of Rs. 550 crore every month or an average of Rs. 18 crore per day. A down spiral that began towards the end of the year 2009 accelerated during the new regime (2009-11). This decline could be touted as the biggest fall in finances for the railways since Independence. When one goes through the details of the railway budgets 2010-11 and 2011-12, one finds the same story of downfall. The main factor which brought this financial meltdown was the lack of will to pursue higher targets of revenue to achieve and generating more loading capacity to increase freight earnings. On the other hand, loading target was reduced by 20 million tonnes to 924 million tonnes in 2010-11. However, goods earnings were retained on the basis of trends of higher yield per NTKM. Total gross earning was fixed to Rs. 94742 crore which was Rs. 1277 crore higher than the budget. With the reduced traffic suspense clearance of Rs. 98 crore, gross traffic receipt was a little higher than the budget target of Rs. 75 crore at Rs. 94840 crore (revised estimate). But the actual situation was somewhat different. The railways could attain only Rs. 94535.63 crore as actual gross total receipt which was less by Rs. 304.81 crore than the revised estimate. As regards total receipts, the actual figures fell by Rs. 1040.53 crore from budget estimates. The surplus/excess was only Rs. 1404.89 crore (actual) which could be appropriated to development fund and no funds were transferred to capital or railway safety funds. Net revenue fell by Rs. 3435.41 crore at the level of Rs. 6346.14 crore as against the budget estimate of Rs. 9781.55 crore. Out of gross revenue earned, the dividend payment to Rs. 4941.35 crore was made, leaving just Rs. 1404.89 crore actual surplus or excess. The budget 2011-12 which provides the figures relating to budget estimates and revised estimates does not give a rosy picture. It has not generated surplus/excess more than the previous year. The revised estimate of surplus shows just Rs. 1492.15 crore i.e., only Rs. 87.26 crore extra. If trends set any example, the actual excess would be even less than the previous year or in no case cross the revised figures as estimated. When there is no or little surplus, what else can one think of development or capital fund? According to estimate of Rs. 106239.00 crore for financial year 2011-12 under the head Gross Traffic Receipts, the revised estimate have fallen by Rs. 2322 crore at the level of Rs. 103917.00 crore. The total receipt thus fell by Rs 2746.35 crore at the level of Rs. 106646.78 crore. It seems that the railway is moving at a snail’s pace ultimately to come to a grinding halt. The situation of fund balances has become precarious. The depleting fund balances and shortfall in surplus/excess have shown the trend as follows: Depleting Fund Balances (Rs. in crore) Years Balance 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 opening 16694.35 Actual 20483.21 BE 15661.26 BE 7698.39 BE 3102.55 BE 2005.93 BE 16529.78 RE 26027.90 RE 15654.71 RE 5032.06 RE 342.51 RE - Closing 22279.35 Actual 19706.76 BE 8360.88 BE 5063.73 BE 1367.64 BE - 20483.21 RE 15661.26 RE 7698.39 RE 3102.55 RE 2005.93 RE - In the same continuation the successive shortfall in surplus/excess and deteriorating operating ratio have been shown as follows: Successive Shortfall in Surplus/Excess and Increasing Operating Ratio (Rs. in crore) Years 2007-08 2008-09 2009-10 2010-11 2011-12 Surplus/ Excess 11449.45 BE 11786.74 BE 2642.26 BE 3173.09 BE 5258.41 BE 13534.08 RE 6355.56 RE 551.03 RE 4104.50 RE 1492.15 RE 13431.09 Actual 4456.78 Actual 0.75 Actual 1404 .89 Actual - Operating Ratio 75.9% 90.5% 95.3% 94..6% 95% During Trinamool tenure the railways demonstrated a disastrous trend. The fund balances were rapidly receded year after year. Since the last year of turnaround, this phenomenon has been quite visible. But three years which have lapsed after the new minister in May 2009 has taken over the charge have shown the deterioration on regular basis. The opening balance of the funds has depleted from Rs. 15661 crore to Rs. 7698 crore and Rs. 3103 crore in the years 2009, 2010 and 2011 respectively. There have taken place more withdrawals than appropriation to the funds with the result closing balance have come down from Rs. 7698 crore, Rs.3103 crore and Rs. 2006 crore in the years 2009, 2010 and 2011 respectively. The same story relates to the successive shortfall in surplus/excess in the revenue earned from the years 2008-09 to 2010-11 onwards and the worst year has been 2009-10 when only negligible amount of Rs. 0.75 has been added. How can investment be made without surplus or excess? The operating ratio which is the best to judge the efficiency and performance has been unfavourable and has increased from the best situation of 75.9 per cent in 2007-08 to its worst situation of 95 in 2011-12.

A New Book on Indian Railways

A New Book on Indian Railways A book as a critique of White Paper on Indian Railways has been recently published (2013) under the title “Indian Railways Financial Meltdown”. The White Paper On Indian Railways was issued in December, 2009, by Mamata Banerjee in retaliation against the achievements of Lalu Prasad and his regime (2004-5 – 2008-9)as minister for the Railways. This created an impression that the turnaround process of the railways was much hyped than real. This also raised a controversy rather disbelief in the minds of the people in general and the railways staff in particular about the earlier achievement of Lalu Prasad. The book presents a situation where an analytical study has been made to provide an answer to the faulty findings of the white paper of the White Paper and has established an anti-thesis of the same. This study thus protects the concept of turnaround of Indian Railways and its transformation from loss bearing to profit generating organization. The Book is indispensable for inquisitive readers, academicians, railways staff and the policy makers. For further details please contact Gyan Books Pvt. Ltd., 23 Main Ansari Road, Daryaganj, New Delhi – 110002. E-Mail: www.books@gyanbooks.com