Lalu makes magic as travel gets cheaper

NEW DELHI: Lower fares and freight rates. High revenue growth and record operational efficiency in the current year. Large plan outlays to increase badly-needed capacity. Dispersed dispensing of tickets and lower fees for electronic ticketing to reduce queues at booking counters.

Tech-savvy ticket examiners armed with hand-held devices on high-end trains to reduce arbitrariness in filling up vacant berths. New trains, including high-speed trains, and additional coaches on existing trains. Railway minister Lalu Prasad’s fourth budget lives up to his reputation as a turnaround artiste worthy of a B-school case study.

However, under the glitz, the hard reality of years of under-investment and constrained capacity bites: the revenue growth projected for the next fiscal, at 12.8%, is lower than the 16% achieved this year and 15% in 2005-06. The projected growth is also lower than the probable growth of the economy measured in current rupees, indicating the Railways’ failure to keep up with the rest of the economy.

“The railway minister has reduced passenger fares across the board. He has also moderated the freight charges. These will have a beneficial impact on price stability,” finance minister P Chidambaram said in a statement. The commodities for which freight rates have been lowered include petrol, diesel and iron ore.

The Railways has achieved an operating ratio of 78.7%, a record, in the current year. This means working expenses are more than a fifth lower than total traffic receipts. This ratio had climbed all the way to 98.3% in 2000-01, leaving the Railways with little money of its own for investment or paying dividend to the government. In 2007-08, the operating ratio is projected to stay below 80%.

The lower increase in expected revenues next year indicates that the Railways has used up all slack in the system, to squeeze additional revenue out of existing capacity. The logical thing to do is to invest in hiking capacity. Mr Prasad has budgeted for a plan outlay of Rs 32,165 crore, a creditable 19% step-up over the current year’s outlay, which itself was 26.6% more than the outlay for 2005-06.

The lowering of fares in AC-1 sleeper by 3% in peak periods and by 6% in lean periods, in AC-2 sleeper by 2% and 4%, and the newly-built AC-3 sleeper by 4% and 8% will no doubt help the Railways fight competition from low-cost airlines. However, the slashing of fares by 4% in the newly-designed sleeper class coach, the Re 1 decrease in prices for unreserved travel and a 20% reduction on superfast surcharge levied on second class tickets for superfast trains will add to the Railways’ cross-subsidy bill, which stands at a whopping Rs 4,000 crore as of now

copied from http://economictimes.indiatimes.com