Railway Minister Suresh Prabhu has expressed concern over the series of railway accidents but was quick to dispel the notion that the Central government was looking for scapegoats. The alarming rate of derailments over the last one year is disconcerting, and the Centre echoes the sentiment as evidenced by the newly set up “railway safety fund” of Rs 100,000 crore to be used to “increase speeds, eliminate unmanned level crossings, and replace (old) coaches.” While swanky stations, faster trains and internet connectivity are desirable, these cosmetic changes paint with a broader brush on a complex canvas.
Not everything is hunky dory with the Indian Railways, and combing through its finances presents a bleak image. The Depreciation Reserve Fund (DRF), a system used to replace old assets, undertook a massive “60% cut in allocation for fiscal year (2016-17) budget at Rs 3200 crore as against the budgeted figure of Rs 7900 crore in 2015-16.”
A fact sheet on the performance of Indian Railways released in March 2013 acknowledged the severe financial constraints which prompted “drawing down from the balances of the DRF to enable minimum plan outlays.”
An article published in The Economic Weekly on February 5, 1949, explains: “With the separation of Railway finance from General Finance in April 1924, a Depreciation fund was opened for the Railways to renew wasting assets built up out of the Working Account. With every increase in the Capital outlay, the contribution from the Working Accounts increases.”
The Indian Railways is the second largest rail-network in the world, and with an exponential rise in population, the demand for nation’s largest transporter has gone up. Going by the numbers released by the Indian Railways, the passenger burden had increased from 7246 million in 2009-10 to 8426 million in 2013-14. The freight carriage also witnessed a sharp rise, with 888 million tonne being carried in 2009-10 to 1054 million tonne in 2013-14. These numbers point at an overstressed system while revealing that the infrastructure has not been commensurate with the increasing demand.
A white paper on Indian Railways released in 2015 said: “IR’s network has a total of 1,14,907 km of track length. Of this, 4500 km of track length should be renewed annually. However, due to financial constraints, the progress in track renewals is constantly coming down over the last six years. The target for 2015 is only 2100 km.”
That leaves over 3000 km of track unattended and vulnerable to wear and tear. This perhaps explains why certain sections in the Indian Railways are more congested than others. According to the same white paper, “40% sections are running at 100% or above line capacity. Line capacity is defined as the number of trains that can be run on a section in 24 hours. In the High-Density Network catering to more traffic, 65% sections are running at 100% capacity.
In between 2011 and 2015, new lines have witnessed a growth of 74% but as of July 1, 2014, 5300 km of track length was pending renewal. The Railways thus faces a conundrum in that while expansion of lines will decongest traffic, accommodate more trains and increase their speeds, a backlog of track maintenance will always keep the safety of millions who travel by trains in constant jeopardy.
No cash surplus
In an article titled: “Why trains derail: Explained by former Railway Minister”, former Railway Minister Dinesh Trivedi illustrates that the system requires on an average Rs 20,000-25,000 crore annually to fix tracks, rolling stocks and signalling systems. In a scathing attack on the misappropriation of funds, Trivedi adds that the railways are not generating enough ‘operating cash surplus to even meet daily operating expenses.’
A cursory look at the financing plan of Indian railways since 2009 reveals only 3-4% of the total share is invested on rail safety. Investments on safety have suffered ‘on account of the low internal generation of resources.’
The operating ratio, an important yardstick to measure the health of a company’s finances, is the measure of what it costs to operate a piece of property compared to the income that the property brings in. The Rail Ministry had arrived at an operating ratio of 92 for 2016-17. It is prudent to note that higher the operating ratio, thinner is the financial health. With a depletion of internal resources, the Railways has to turn to borrowing for funding.
The white paper reveals that the share of internal resources in the overall funding of railways has dipped sharply from 28.7% in 2010-11 to 19% in 2013-14. At the same time, the borrowing has increased from 23.9% to 28.3%.
There are clear indications that Indian Railways’ funds are stressed today. These finances have a bearing on how the Railways are run, ergo on the safety of the public, it transports. Pakistan’s Inter-Services Intelligence agency may or may not have a hand behind the recent derailments but the terror angle is proving to be a constant distraction from the real issues at hand. It is up to the Railway Miniter to try and resurrect the beleaguered lifeline of the country.