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COVER STORY:  BUDGET 2001
Mamata's Choice 

A first-generation, third-generation catechism circa 2023 looks back at Mamata Banerjee's 2nd Railway Budget.

By Ashish Gupta

Mamata BanerjeeHey Granddad, I was preparing for a term paper on budgets and I came across the term Railway Budget. Don't tell me we actually had a budget for the Railways Corporation then?

I am afraid they did, dear grandson. That was well before the formation of the Railways Corporation and the whole thing was a department of the Union Government. The reasons were mainly historical: the British did it because for a long time Railways constituted the bulk of the Government's statement of finances, and we just continued with the tradition post-independence.

So, it was something like the annual general meeting of a company with some minister presenting a statement of finances of the department?

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Actually, it isn't as simple as that. Railway budgets were presented by the Railway Minister and they were normally exercises in political funambulism. I remember one budget. It was the 2001 Railway Budget and it was presented by the then minister Mamata Banerjee. I remember it particularly well because it was the last thing I covered before moving out of economic journalism to strawberry farming, a far more lucrative business if I may say so, and also because it was such a strange budget. Elections were due in her home state, West Bengal, that year, and she promised nine new trains to that state, and left passenger fares, then lower than corresponding fares in most parts of the world, untouched.

So, how did Railways make money?

Actually, it didn't. At least not from passenger fares. I remember, in 2001, Railways was recovering just around 60 per cent (Editor's Note: The actual figure was 62 per cent) of the cost from passengers. Every year Railways would lose Rs 3,000 crore because of this. But this loss was subsidised through increased freight charges.

You mean, the Government made companies inefficient just to cater to a vote-base?

Rail-Road Ratio

  Rail Road
1950-51 88% 12%
1960-61 83.8% 16.2%
1970-71 69% 31%
1980-81 61.9% 38.1%
1986-87 51.5% 48.5%
1995-96 40% 60%
2000-01 40% 60%
2001-02 40% 60%
Figures are freight ratios

That's just what it did. The hike would always be minimal and some bureaucrat would insist that a slim increase couldn't possibly hurt companies. But it did. In 1950, Railways transported around 80 per cent of the goods shipped in India. By 2000-01, it transported only 40 per cent. Only those companies that didn't have any other option, used Railways to ship things.

Shucks, that sounds bad...

Reality was worse. Railways insisted on subsidising freight charges for things like LPG, urea, and foodgrains. And it also insisted on connecting remote locations that few people travelled to. By 2001, almost Rs 30,000 crore of good money was lying around in the form of unfinished projects.

I am surprised it didn't go bankrupt...

The government can't go bankrupt, grandson. But things were bad. By 2001, Railways was spending Rs 16,000 crore a year on wages, and another Rs 6,000 crore (Editor's Note: Rs 5,800 crore) on pensions. I remember a fascinating piece of statistic: by 2001, Railways was spending Rs 98.80 to generate Rs 100 in revenue. It also had to service a huge debt of Rs 26,000 crore-money raised to support unviable projects.

But what about all the things Railways Corporation does now, like broadband services?

Those came later. True, there was some talk of Railways finding a partner to run RailTel, as it was called back then, around 2001, but nothing much came of it.

I am so glad I live in 2023.

So am I.

 

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