CII revival package for railways

New Delhi: The Confederation of Indian Industry (CII) has outlined a six-point revival package for railways in its pre-budget recommendation to the ministry of railways.

CII has emphasised on the need to phase out cross-subsidisation in the Indian railways. The present revenue mix of 30:70 from passengers and freight business respectively because of massive subsidisation of passenger fares and overcharging of certain categories of freight traffic leads to diversion of traffic to road transport, CII says.

Secondly, the confederation has recommended the correction of the distortion in the pricing policy of the railways. The freight rates should reflect the cost of the operation plus profit margin and the decision for increase of freight should be based on sound costing principles rather than on socio-political considerations, CII says.

CII has also urged the government that subsidies on transportation of essential commodities, passenger services and investment in uneconomic branches must be defined and reduced as far as possible.

Thirdly, CII has emphasised on the need for railways to adopt aggressive marketing strategies to recapture the lost market share. An important step that railways must take is to start scheduled freight trains, providing guaranteed transit time, CII has pointed out.

CII has stressed that the railways should revert to the earlier practice of assisted siding where the capital cost in respect of track outside the premises of siding holder is borne by the railways or private party can fully finance the siding and 50 per cent of the cost can be adjusted in the cost of freight in the specified time frame.

Reiterating the need to encourage multimodel transportation, CII has pointed out this mode of transportation is the need of the hour as customers look at convenience, safety and cost of the total logistics.

Fourthly, there are plenty of opportunities for railways, the confederation has pointed out, to improve its finance by vigorously raising revenue through non traditional sources. Moreover, right-sizing of the railway staff strength to maximise transportation output per person is the need of the hour, CII says.

CII feels restructuring is necessary to improve the efficiency and productivity, thereby increasing the productivity of the Indian railways. The target set by the ministry to bring down the staff cost to about 35 per cent of the gross traffic receipts within the next 10 years must be realised, CII says.

Fifthly, CII has reiterated that the use of IT particularly in the areas of rack and terminal management, information system on freight movement, reservation system and stream lining operations would improve the effectiveness and efficiency of the railways.

Last but not the least, CII has said the scope for public private partnership is enormous in railways, ranging from commercial exploitation of air space to private investments in railways infrastructure and rolling stocks. CII feels private investment could be attracted in cargo handling, maintaining and managing railway stations, catering and hotel business, telecom and production units.

Indian railways, the worlds second largest railway system under a single management, carries 1.25 million tonnes of freight traffic and 12.53 million passengers daily. However, in the last couple of years, the railways distinction of being the lifeline of the nation is gradually fading due to constant loss of market share to road transport, declining budgetary support from the central government, slow modernisation and upgradation and unabated rise in expenditure, CII has stated.

Though in actual terms both passenger and freight traffic have actually increased, the rise is marginal and low compared to road sector. According to CII figures, the freight traffic in 1998-99 registered a negative growth as the railways lost the market share to road transport.

CII has pointed out that railways contribution to GDP over the years has drastically come down from 2 per cent in 1960-61 to 0.9 per cent in 1999-2000 whereas the contribution of overall transportation sector to the GDP has gone up from 3.7 per cent in 1960-61 to 5.4 per cent in 1999-2000.

According to CII, the slow growth in revenue receipt, huge expenditure, particularly on account of staff cost and declining budgetary support, has pushed the finance of the Indian railways in a precarious condition.

CII has expressed concern that the operating ratio, which represents ratio of working expenses to gross revenue, has been estimated to be as high as 98.8 per cent in 2001-02 has been on the decline and was down to 91.97 per cent in 1990-91. An added pressure, CII has pointed out, has been the amount spent on staff wages and other allowances, which has actually grown from 42 per cent in 1998 to 50 per cent in 2001-02.

Moreover, the Central Plan outlay on railways has come down to 8.5 per cent in 2001-02 from the 13.3 per cent in 1991-92. The share of budgetary support in the Plan size has also been coming down over the years from the 75 per cent in the Fifth Plan to 23 percent in the Eighth Plan period.

CII feels that one of the reasons of decline of railways share in total transport was its inability to augment capacity and moderise itself to meet the challenges. CII has urged the government to take necessary steps should be taken to create a conducive environment for the growth and development of the railways. CII has reiterated that the recommendations of the Rakesh Mohan Committee should be implemented.