Economy Feb 25, 2013
Editors note: This piece was originally published when Railway Minister Pawan Kumar Bansal announced a fare hike in January 2013
Pawan Kumar Bansal has demonstrated once again a fact that has been staring us in the face for some time: the railway budget is redundant. It is a needless indulgence used by politicians to make populist speeches to try and buy votes.
As a commercial undertaking, the Indian Railways are free to set tariffs whenever these are warranted. This is what the Railway Minister has done by announcing passenger fare hikes to raise Rs 6,600 crore over a full year - nothing less. If this much can be achieved with a mere press conference, why bother with a railway budget speech just to present accounts and make all kinds of announcements - new railway lines to favoured constituencies, new halts for existing trains, etc? It's a waste of parliament's time, though one must admit parliament does often waste our time and our money.
If Dinesh Trivedi, Bansal's predecessor's predecessor's predecessor (yes, we have had four railway ministers in less than 12 months - Trivedi, Mukul Roy, CP Joshi and Bansal) had done this, and even dispensed with the press conference, Didi may not have tossed him on the dungheap of political history. Trivedi did the opposite of what Bansal did: announced a freight hike before the budget, and then left the fare hike for the budget speech. How daft!
Clearly, Bansal has learnt from Trivedi's much-hyped political demise and done the politically wise thing. Incidentally, this is not the first time the railways have announced fare hikes before the budget. In September, after Mukul Roy's exit in the wake of Trinamool's pullout from the UPA, the government quietly imposed a 3.7 percent service taxes on rail freight and some upper class fares. P Chidambaram collected his tithe without us knowing it.
What all this proves is that running the railways sensibly does not require a grandstanding budget speech. The railways may need to present accounts to Parliament, but that can be slipped in quietly - in the same way other ministries and public sector undertakings do. And the Public Accounts Committee can pore over the numbers over black coffee and less public din.
Bansal, while announcing the hike yesterday, pointed out that rail fares were last hiked in 2003 - after which the UPA has doing everything possible to raise freight and spare passenger fares.
The skew began with Lalu Prasad, and continued with other railway ministers in UPA-2. Not hiking passenger fares has been touted as concern for the aam aadmi, but this is nonsense.
When you raise freight charges, prices of all goods rise since companies adjust their product prices whenever transport costs rise. When you up passenger fares, it affects only a minuscule proportion of the population: those using the railways. In short, the tradeoff is between affecting the entire spectrum of aam aadmi all over the country through a general freight price hike, or something limited to only users of railway services.
Freight hikes are always passed on to the aam aadmi, and so if anything is anti-people it is across-the-board freight hikes, not passenger fares. In fact, the trend of raising upper class fares more than second class travel ensures that the aam aadmi is protected to the extent possible.
Apart from demonstrating the redundancy of the railway budget speech, Bansal has also showed skill in the art of communicating price increases. The railways now tend to express fare hikes in terms of paise per km. Thus for non-AC passengers, the fare hikes this time have been from 2 paise per km (second class suburban) to 6 paise (for non-suburban fares).
Even the beggar on the street can afford to pay these fares.
Of course, the media has been too sharp to let this pass. Today's newspapers clearly mentioned that fares have risen by 10-25 percent, and not by a few paise here and there.
Bansal, though, has surely given our consumer companies something to think about. The next time Hindustan Unilever raises the price of Pears soap, it can say it is raising them by 2 paise per gm. Never mind that the full soap may cost Rs 2 more.
But one area where Bansal has managed to pull over the eyes of the media - which has, of course, been willing to be conned - is by selling the fare hike as reform. (Indian Express says "Bansal signals reform..."; The Economic Times says "Rail fare hike keeps reforms on fast track"). If raising prices equals reform, my local kiranawala should be considered a true reformer - for he raises the prices of vegetables and pulses almost every week, if not every day.
True reform would mean allowing the railways to set their own fares, subject to an independent regulator. We haven't heard any of that yet.
But we need to give Bansal full marks for pretending to be a reformer, and zero to the newspapers for touting passenger fare hikes to prevent railway bankruptcy as reform.
However, the fundamental point this writer would like to make is the same as in Trivedi's case: it's time to abandon the budget speech.
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