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A cess for new rail tracks
Dear Minister Sadananda Gowda:

At the Economic Editors Conference October 2010, I suggested a facile system of raising resources for railway development: a simple cess on freight and passenger tickets. This is on the lines of the cess on diesel and petrol introduced by the Vajpayee government to fund the golden quadrilateral and rural roads by state governments.

The spectacular improvement in road connectivity witnessed through the last ten years has been built on this cess, combined with the involvement of the private sector in road construction, maintenance and operation. Such concepts must be introduced by the Railway as well through the simple system of a cess. With the power of the Railway Ministry to prepare its own budget, the task is simple.

Traditionally Railways have been receiving support from the general budget. With the Railways enjoying the privilege of presenting a separate budget, we can endeavour to make it self-reliant.

While formulating the budget for Railways, we can bear in mind a few points :

•    Additions to new railway lines through the 67 years of independent India have been meagre hardly 170 km per year.

•    Most sections have been saturated with traffic: eg. Chennai-Bengaluru.

•    There is urgent need for high speed tracks that would provide for much quicker transfer and faster turn around of coaching stock.

•    China, which was way behind India at the time of independence, is way ahead building modern high speed rail lines and offers a good model.

A cess on freight traffic and also on non-suburban train tickets can help raise around Rs 5000 crore a year. This can be leveraged to raise another Rs 10,000-15,000 crore through multi-lateral/bilateral funding. The sum raised can fund construction of around 1000 km of dedicated high speed new rail lines every five years. The Diamond Quadrilateral can be one such project that can be followed by dozens of new rail lines in different regions linking important towns.

Like the Konkan rail project, beneficiary states can also be involved in funding such projects.

This single project can trigger economic activity on a grand scale stimulating production of steel, signaling equipment, coaching stock, construction of railway stations… on a massive scale, providing for huge employment.

IE has been advocating the building of such high-speed rail corridor between Chennai and Bengaluru to start with, followed by Bengaluru-Hyderabad, Hyderabad-Chennai and Chennai-Kochi in quick succession.  On the lines of the dedicated freight corridor presently cleared for Delhi-Mumbai, such rail cum industrial corridors could be cleared for the other regions.

Mr Minister, we need bullet trains that run at 350 km/h that would ease pressure on our airlines and reduce costs of fast travel. Such trains were contemplated as far back as 25 years ago. In 1987, it was estimated to cost Rs 490 lakh per km, for a line dedicated to run 300 km/h trains. Some estimates place today’s number at over Rs 100 crore per km. At that higher end, the Chennai-Bangalore route of 330 km will cost Rs 33,000 crore. Some back of the envelope calculations suggest that to profit, passengers should be charged Rs 5 per km; in this case Rs 1650. This is about $33 or $0.10 per km, which is on par with prices in the US. That for sure is par on course, as you would reach Bengaluru city in 60-minutes flat! Contrast this with a 1st A/c price on the Shatabdi and you notice that this is only about 70 per cent more.

The impact of leaving the road transport development to the private sector and retaining railways with the public sector is best seen in the lopsided growth of these two vital transport infrastructure.

Despite the lower freight tariff, railways are not preferred mode for the movement of all but bulk goods like foodgrains, iron ore and coal. While substantial improvements could be achieved in computerisation of passenger traffic, a corresponding focus was not made on computerising freight movements. It is still a far cry to move goods to tight and short schedules with guaranteed delivery.

Contrast this with the advantages of facile rail movement across state borders without detention at check posts and without payment of bribes. Contrast also the advantage of movement in bulk by the railway, against the load limitation of smaller consignments by trucks and also the economies of movement by train through electric traction compared to the movement by trucks burning expensive diesel.

 

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