All that the 'iron lady' of West Bengal, Mamata Banerjee, had to do was to re-write the script of her earlier two budgets (2000-02) for her first Railway Budget (2009-10) as a minister in the UPA government. Her 'pro-passenger and humane' approach responds to the 'high expectations' of the people for new lines, more trains, better services with cleanliness, punctuality and safety in travel.

Her ebullient populism was in full flow as she reeled off in Lok Sabha her proposals for passenger traffic expansion regardless of the operational feasibility of adding scores of new trains on the heavily congested trunk routes. She raised eyebrows while passionately arguing for economic viability to be subordinated to social desirability of projects to link the remotest corners of the country. This would serve the needs of 'face-less poor' and would be consistent with 'inclusive growth,' according to her.

What is more, she earned the praise of prime minister Manmohan Singh for doing a 'competent job,' without increasing fares or freight rates, focusing attention on passenger amenities and security and safety of rail travel and for innovative mechanisms, including public private participation (PPP) to improve railway output and finance more investment.

Populist budget

Her budget was not only overly passenger-oriented and substantially West Bengal-centric, as she did on a lower key in her 2000 and 2001 budgets under NDA rule, it also underscored the political message of her decade-long battle to end the Left rule, as she eyes the 2011 elections with utmost confidence. In earlier exercises she avoided fare revisions while increasing freight surcharges for two successive years, unmindful of cross-subsidisation in the tariff structure.

In this third version of her railway budgeting, Banerjee left fares and freight rates untouched. She set a 'realistic' freight target at 882 million tonnes for the current year, keeping in view the recessionary trends in the manufacturing and export sectors. Whatever ideas she could throw into her speech to take railways to 'higher levels' of performance were swamped by the torrent of her proposals for passenger amenities and expansion of facilities.

These included 50 world class stations, 'adarsh' stations (375), multi-functional complexes, Yuva trains, 12 inter-city non-stop (Duronto) trains, 57 new trains, 27 extensions, 17 gauge conversions, doubling, electrification, staff welfare and travel concessions for the poor and not-so-poor press correspondents. She kept the promise of a monthly season ticket of Rs.25 for travel upto 100 km to the poor with monthly income not exceeding Rs.1500. This 'izzat' (dignity) scheme would give lakhs of people the chance to travel on rail with dignity.

Railway finances

Railways are on a stronger footing today than her times in NDA. The improvement in railway finances is largely derived from the surge in freight traffic during a period of robust economic growth. No wonder, her predecessor, Lalu Prasad, was sorely disappointed that Banerjee under-played his efforts in engineering the financial turnaround. On the other hand, she talked of 'deterioration' in the passenger services and dubbed Prasad's pre-election interim budget estimates as 'unrealistic.' Capping it all was her coup de grace toward the end promising a white paper on railways' performance over the last five years.

Was it intended to be a slur on Prasad’s record? To doubts raised, she clarified the idea was not aimed at against any individual but to develop a 'Vision 2020' with short- and long-term strategy for the railways. Credit should not be grudged to Prasad for the turnaround in railway finances during his stewardship (2004-09). In his own way, he tried out ideas like 'dynamic pricing' policies for freight and passenger fares for peak and non-peak seasons and balancing reductions in fares with incentives in the freight segment, all designed to earn substantial cash surpluses.

Revenue-earning traffic soared from 557 mt in 2003-04 to 794 mt in 2007-08. For 2008-09 the target was set at 850 million tonnes. Though banerjee talked of a shortfall by 17 mt, the revised estimates of 2008-09 in the budget maintain the original figure on the basis of trends in freight loading and earnings. There was even a marginal increase in the gross traffic receipts, under both passenger and goods. But the operating ratio - percentage of working expenses to gross earnings - which came down over the last five years to 75.9 per cent in 2007-08 was higher at 88.3 per cent in 2008-09, mainly attributable to the implementation of the sixth pay commission recommendations.

Railways have been generating sizeable cash surpluses after fulfilling dividend liabilities. But Banerjee's budget for 2009-10 reflects the rising expenditure burden and a significant reduction in cash surplus after meeting dividend liability. The pay commission outgo this year would be Rs.14,600 crore and increase in appropriation to the pension fund will be over rs.13,000 crore. This has led to further deterioration in the operating ratio to 92.5 per cent. Ratio of net revenue to capital, which was a healthy 20.7 per cent in 2007-08, declined to 10.6 per cent last year and would be further down to 6.6 per cent in Mamata's budget. She hopes government's stimulus measures to revive the economy would help meet the ambitious loading target of 882 mt and the railways would make special efforts to attract more bulk traffic.

Public-private partnership

As in the past, Banerjee turns to utilisation of land and air space for commercial purposes through PPP mode the concept she would perhaps extend to other areas like developing world class stations and multi-functional complexes on station premises. Logistics parks and mega power plants would also be developed through this mode in the industrial corridor that would come up along with the Dedicated Freight Corridors. She announced a new coach factory to be set up in Kanchrapara (West Bengal) as a public-private joint venture while the Railways would set up a 1000 MW power plant at Adra in under-developed tribal area, also in her home state, for traction supply with economical tariff.

Seven new lines would be taken up for construction in the current year, she said. Under the plan of taking up socially desirable projects, 53 more will be proposed for rail connectivity. Major schemes would be sent for Planning Commission's approval. An expert commitee to be appointed would advise her on innovating financing and implementation of such projects.

Tapping new resources

The Railways Annual plan for the year will be Rs.40,745 crore as against rs.36,336 crore in 2008-09. It will be made up of internal resources at rs.15,675 crore. and budgetary support Rs.15,800 crore, leaving Rs.9170 crore to be raised through borrowing. Tax-free bonds would be floated by IRFC for mobilising resources.

In her earlier stint as railway minister, Banerjee had talked of making commercial use of land and air space and announced laying of optic fibre cable network along railway track for commercial utilisation. Finding little progress on her 2001 proposal, she is now constituting another expert committee headed by Sam Pitroda to suggest "further innovations to utilise the cable network and take information technology to remote areas."

She would also have a committee led by Amit Mitra of FICCI to prepare a plan for toning up project implementation through PPP to get over considerable delays in execution.

Relatively much less attention was given to the freight side in the budget. The only proposals Banerjee indicated were measures to improve loading of bulk goods and increasing railways' share in new traffic streams like automobiles and encouraging private ownership of special purpose rolling stock for commodities and private operation of freight terminals. With no freight tariff changes, the corporate sector welcomed the budget. The budget provides for acquisition of 18,000 wagons almost entirely from manufacturers in West Bengal.

Overall, Banerjee reverts to her earlier stance of treating railways a public utility which should provide fast, clean and safe travel at affordable cost to millions. Financial health of the railways takes a lower priority in her scheme of things.