Author: Bhavna Vij-aurora
Publication: Outlook
Date: September 24, 2007
URL: http://www.outlookindia.com/full.asp?fodname=20070924&fname=Railways+%28F%29&sid=1
Introduction: Not all is profit in the Rs
21,578 crore Laloo tom-tommed last year
One year back, they were scripting the story
of the "great Indian Railway turnaround". Upbeat babus, led by their
mantri-messiah Laloo Prasad Yadav, went to town proclaiming how they got Indian
Railways chugging, sparing no forum to tom-tom how it would mop up profits
surpassing those of top public sector earner ONGC.
Compared to that buzz, things are unusually
quiet for 2007-08. No tall projections this time, no talk of bettering last
fiscal's Rs 21,578 crore profit. Rs 21,578 crore? Amazing as it sounded then,
Railway Board members now confirm that much of Laloo's success story was more
hype than substance. As one official put it, "The turnaround is probably
one-third true, one-third well-orchestrated publicity, one-third jugglery
of figures."
Always clever with words, Laloo seems to have
shown skill with numbers too. A close scrutiny of the account books reveals
the net investible surplus of the railways at Rs 11,000 crore-almost half
of what's been touted as profits. Even this money has been earned at the expense
of passengers and at risk to their safety.
Confirming as much, R.R. Jaruhar, till recently
Railway Board member (engineering) and part of Team Laloo, says, "Things
have been presented lopsidedly. Growth is a process of continuity, it cannot
leapfrog. All this is accounting jugglery." Citing examples, he says,
"A large amount of money being shown as profit is not available to be
ploughed back.
It's not investible surplus. Part of it is
the suspense account: money promised to the railways but not yet given to
it." This, conventionally, is not profit.
Not just that, the railway pension fund-which
accounts for Rs 9,000 crore of the Rs 21,578 crore profit-was shown as cash
surplus when it was money the railways can't invest. Says former railway finance
commissioner S. Murali: "The railways are now displaying all their wealth
in its full glory. But then it's not fair to compare with previous years,
unless you put those accounts in a similar format." Adds Vijaylakshmi
Vishwanathan, another former railway finance commissioner, "The railways
under Laloo has altered the way the balance-sheet is presented. It has resulted
in the revenues getting inflated artificially."
The creative accounting did not stop here.
Making up the Rs 21,578 crore was:
* The Rs 850 crore safety surcharge on passenger
fares and other receipts was shown as profits under miscellaneous receipts
that amount to Rs 2,500 crore. Incidentally, the safety surcharge was to be
levied only till March 2007. The railways converted it to a development surcharge
without cabinet approval.
* Rs 1,700 crore due to the Indian Railway
Finance Commission as dividend for lease of wagons;
* The Rs 550 crore licence fee for running
container trains (returnable in case the operator wishes to withdraw).
* Just before the end of '06-07 fiscal, the
railways announced that tickets could be reserved 90 days in advance instead
of 60 days. Thus an additional Rs 550 crore was added as advance earnings
for the next fiscal but included in '06-07 balance-sheet.
But what about actual earnings? Here, the
railways primarily did two things: substantially increased the load carried
by freight trains and put in place a slew of ticketing rules which extracted
money from passengers even as Laloo claimed he had not raised fares.
A chunk of the extra earnings-Rs 5,000 crore-came
by increasing the carrying capacity of container wagons by an additional 10
tonnes each. The wagons were anyway being overloaded; corrupt officials pocketed
the money which should have come to the railways. Laloo just decided to make
it official, offering another of his rustic gems, "If you don't milk
the cow fully, it will fall sick."
However, it was a practice experts had questioned
repeatedly on grounds of safety. The rail infrastructure-tracks, bridges,
wagons and locos-they pointed out, can be stretched only to a limit. While
additional load was being carried, maintenance schedules were altered, compromising
safety norms to allow more running time to trains. The frequency of train
examination and maintenance too was changed. Earlier, train examination was
done every time a train came back to its base station, irrespective of the
distance travelled in the interim. The railways started carrying out this
exercise after every 7,500 km.
As expected, various zonal divisions started
reporting increased rail fractures, stress on old bridges and wagon coupler
failures due to increased axle load and less frequent maintenance.
Accessing some internal correspondence between
the various zonal offices and Rail Bhavan, Outlook has come to know the following:
* The East Coast Railway reported a 42 per
cent increase in rail fractures, increased instances of wheel slipping and
stalling, increase in 'sick detachment' (wagons needing repairs), and failure
of important equipment in electric locos.
* The Southeastern Railway reported increased
en route detachment due to wagon body bulging, stalling and wheel burns, and
vulnerability of a large number of bridges.
* Southern Railway reported increase in spring
failures and brake beam defects, and in overall sick marking.
* South Central Railway pointed out stalling
of wagons carrying load above their capacity, and also increased rail and
weld fractures. These were the very concerns experts had voiced when the railways
decided to increase the axle load without any trials and without the requisite
approval of then chief commissioner railway safety (CCRS) G.P. Garg.
Recently retired from the post, Garg spoke
extensively to Outlook. "As the CCRS," he told us, "I raised
objections. The railway bridges are old, hundreds of them needing rehabilitation.
The railways wanted to run trains with an increased axle load without any
checks, tests or technical analysis. I told them not to take ad hoc decisions
but to fulfil the conditions laid down for increasing axle load." According
to him, the tracks, the wagons, locomotives and even the wheels needed to
be tested for impact of additional loading.
And if the railways under Laloo could increase
the axle load it was only because infrastructure renewal work had been done
before he took over, says Garg.
His predecessor Nitish Kumar had created a
non-lapsable Rs 17,000 crore corpus, the Special Railway Safety Fund, and
large-scale renewals had been accomplished in terms of tracks, signalling,
coaches and locomotives.
To get over the CCRS objections, the Rail
Board officials, including Laloo's OSDSudhir Kumar-apparently the mastermind
of the turnaround-assured the commission that they were increasing axle load
only on an experimental basis and would fulfil all requisite conditions. The
railways are now running higher axle load on almost all routes, but "fulfilling
of conditions", that's another story.
And remember the iim-Ahmedabad study that
first gave a stamp of credibility to Laloo's turnaround? Professor G. Raghuraman,
author of the much-touted report that the railways commissioned for Rs 4 lakh,
now tells us how that came to pass. "Additional revenue came from improving
the turnaround time of wagons and carrying additional load," he concedes.
But this growth is unsustainable, he adds. "The railways has taken full
advantage of carrying extra load. There can only be a one-time increase with
the same asset. Investment has to be made in asset improvement and upgradation,"
he says. Far from that, the turnaround has contributed nothing to passengers
in terms of improvement in amenities and facilities.
The IIM study did make Laloo the man of the
moment. So much so, visiting students from the Harvard Business School, Wharton
and MIT were queuing up to study the miracle he had wrought. Or so it was
projected. Now it seems that the visit by the students of the Harvard Business
School in December 2006 was not to study any railway turnaround; they had
merely called on the rail minister as part of their Camp India programme.
Outlook contacted Seth Cohen, one of those students who had attended Camp
India. He had this to say: "The visit was informal," he said, "arranged
by our Indian hosts. It was not connected to any academic project." Ditto
the MIT students toasted and hosted by Laloo.They came to India during their
spring break in April 2007; the railways was another diversion during their
eight-day break.
So, was the Laloo Express a passenger train
all along? The minister does deserve some credit, though not the kind he managed
to attract. Juggling numbers is high art for sure, but it doesn't always make
sound commerce.
