It is very nice to note that Niti Ayog has raised questions on long term financial sustainability of the proposed Mumbai Suburban projects. In order to ensure the financial sustainability and future development of Indian Railways, it is necessary that this question should be asked for each and every project under implementation, under survey and under planning in IRlys. Depending on the answer only the implementation should be pursued. Throw forward of only the high priority projects in IRlys is Rs. 2,08,054 Crore (2015). Rs. 1 lac crores cost escalation has already happened in these high priority projects. After including the non-priority projects, the total pending projects with IRlys should be around 10 lac crores (approx.). How many of them are financially sustainable? Each project under implementation need to be reviewed in totality and suitably modified/ rationalized so that each project is financially sustainable or at least the losses be minimized...
more... to an acceptable level. There is urgency to prioritize these projects based on merit and take up in phases instead of starving all of them with simultaneous implementation, so that delays and cost escalation are minimized.
Suburban railway is one of the most loss making segment of Indian railways, as the ordinary second class fares are too low and heavy concession given on monthly passes, by way of charging fewer number of journeys than the most probable number of journeys. Since no increment in fares was made for 10-11 consecutive years, whereas input costs esp. salaries/pension has increased many fold. Hence second class and especially suburban travel is bleeding railways like anything. Had the fare been increased by a modest 6 % (much below the rate inflation), the scene would have been much better.
Mumbai suburban is the premier suburban Rly system of IRlys, carries around 50% (probably 58% as far as I remember) of total suburban traffic in India. Mumbai suburban used to generate operational profits around of 140 crore Rs. several years ago (400 crore rupees at current price) is now giving a loss of 1500 crore Rs. For other suburban systems which has always given losses, the losses are likely to be much higher than Rs 1500 crore per annum.
For FY2014-15, Kolkata Metro with total capital at charge of Rs. 5148Crores and Rs 496 crore were spent on operation for the year, the total revenue generated was only 195 crores. There was operational loss of about 300 crore Rs. The interest paid by Indian railways for 5148+496=5644 crores @10 %pa is about 564 crores i.e. total annual loss =300+564=864 crores. This loss is slated to become higher after commissioning of projects with initial cost of around Rs 20000 crores are under implementation in Kolkata Metro, which on completion shall cost at least 25000 crores (assuming a very modest cost escalation of only 25%, actual is likely to be much higher than 50%). Then with about 30000 crores of capital, the losses shall proportionately increase from 864 crores today to 4600 crore per annum. This is how a financially poor project bleeds IRlys after commissioning. Indian Railways shall not be in a position to bear such quantum of financial losses. Same will be case of suburban travel and second class travel in Indian Railways.
Making Kolkata Metro a zone means more expenditure and hence more losses. All divisions, Mumbai Suburban Rly are generating several times more revenue than the Kolkata Metro. Similar demand had also been raised for Mumbai suburban Rly which carry much more number of passengers (about 80 lacs per day).
Metro and suburban states are serving the interests of Metro cities which are usually a part of relatively richer states. These metros boost the economy of the state (richer ones) by providing extremely subsidized travel at the cost of poorer states with no metro/ suburban trains
Another potential threat to Indian Railways is quick implementation of the so called socially desirable projects which are financially undesirable. These projects shall be financial bleeding Rlys and benefitting the people & state Govts through which it pass. These projects need to be strictly monitored and rationed .ie. Rlys should limit such projects to minimum and them uniformly through out the country. Such financial losses should be shared by State Govts also as they arebeneficiariesof such projects and not the IRlys. Quick implementation of such loss making projects (i.e. faster financial bleeding) is a sure recipe for bankruptcy of IRlys.
Most of the Rly lines in IR are chocked to capacity and very badly needs huge investment/ expansion. Rate of commissioning of new rly tracks have already been accelerated from about 4km/day to 7km/day and targets are gradually increase it to 19 km within 3 years, sounds very good. Its impact on IRlys after commissioning will depend on the profitability of these projects.
Financially sound projects shall make the IRlys more potent and thriving whereas the loss making ones shall make IR a loan defaulter and a bankrupt organization. With profitable freight traffic going to DFCs, where from IRlys shall derive its profits to run all these loss making ventures?
Fares should be scientifically determined after considering various costs not only for Mumbai locals, but also for locals in other Metro cities including Kolkata Metro, so as to ensure that IR does not default on loan payments and become bankrupt in future.
