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Why Modi should get Sadananda Gowda to junk his rail budget speech

Why Modi should get Sadananda Gowda to junk his rail budget speech

One of the criticisms levelled against Railway Minister Sadananda Gowda, who announced a big increase in passenger fares (14.2 percent) and freight (6.5 percent), is that it was some kind of disrespect for parliament, when a rail budget was just round the corner.

This is wrong, for two reasons: one, if you are bleeding on the road, the first duty is to ensure the victim stays alive even while the legal niceties are taken care of. Two, a commercial undertaking like the railways has to take timely commercial decisions and not worry about when the annual report is going to be presented to the annual general meeting of shareholders.

In fact, I would go one step further and say the Rail Budget event ought to be abolished. Like a defence budget or a civil aviation ministry budget, the rail budget does not require a speech to be made, only a set of accounts to be presented to parliament once a year, since the undertaking is owned by the people of India.

Consider the opposite case: do we ask for an Air India budget and make it a big event? No, because we know that Air India is a commercial undertaking, and the only duty of the Air India board is to present its annual set of audited accounts to parliament. And, of course, if parliament mistakenly wants to keep rescuing Air India with periodic bailouts, then the airline has to periodically tell our members of parliament what it is doing with the cash.

How is the Indian Railways different from Air India? Of course, one difference is its sheer scale and size. The Indian Railways is Godzilla to Air India”s baby chimp. The other difference is that one operates a monopoly, while the other has to compete. This partially explains why the railways are so huge. It would not have been so huge if it had to compete like Air India.

But that apart, both are commercial undertakings, carrying passengers and cargo. Both are loss-makers when it comes to passengers. Both are run inefficiently. Both are horribly overmanned.

So why do we need a railway budget and not an aviation budget?

The separation of the railway budget from the general budget is rooted in British Indian history. The colonial administration, keen to exploit trade with India, encouraged railway companies to begin operating in India, but some of these railways (including some run in autonomous princely states) were taken over in the first decade of the 20th century online casino when they either could not be run efficiently, or because it seemed politically expedient to have a common standard and unified control.

A fledgling Railway Board came into being in 1905, and it operated directly under the political control of the colonial administration. The various railways served British India”s purposes, but after a brief period of profitable existence, including and upto the end of the First World War, they were simply becoming unprofitable.

Some time in 1921, Sir William Acworth, a railways expert set up to study the working of the Indian Railways, decided that the they could not be run under the general budget and needed a separate existence. So, even while the railways were taken over and run as a government undertaking, the revenues were delinked from general budgetary revenues. This is why the railway budgets – which were growing very big with the expansion of the network to over 60,000 km – were given a separate listing.

This made sense then, since the running of a commercial undertaking could not be tied to the colonial administration”s general revenues and budgets. So the colonial government wanted the railways to manage their own finances and not become a burden on general revenues.

However, does this make sense now? The budget of a commercial undertaking is no different from that of a corporation like Infosys or a public sector company like Bharat Heavy Electricals. There is need for account-keeping, budgeting, and the presentation of annual reports, but there is no need for a railway budget speech or the hype and hoopla associated with such events.

Like the budget of any ministry, the railways” performance needs to be debated in parliament, but that”s about it. It need not be any different from the presentation of the accounts of Air India.

Presenting separate budgets for the railways comes with a political moral hazard. Expectations get built into it for the announcement of new railway lines that may or may not be commercially viable, and for the railways to announce a greater intake of fresh employees.

In 2013″s railway budget – reportedly a reform-oriented budget – Pawan Kumar Bansal took pride in expanding the organisation”s already bloated staff by 1,52,000 additional employees. He said: “Madam, our 14 lakh employees constitute our most valuable asset. Some of the measures I propose to take for their welfare are: (i) concerted efforts to fill up approximately 1.52 lakh vacancies this year. It is a measure of popularity of railways as an employer that a staggering 2.2 crore applications were received.”

It is to stop such populist nonsense that the railways need to be reduced to a normal commercial undertaking going about its job quietly. Make the railway budget speech a political affair, and economic ruin is what you get.

The Indian Railways can do without budget speeches. Narendra Modi can ask Gowda, who owes his job, to either junk his speech or keep it restricted to five minutes. The details can be laid in parliament without fuss.

Source : http://www.firstpost.com/budget-2014/experts/why-modi-should-get-sadananda-gowda-to-junk-his-rail-budget-speech-1592551.html

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