Moving to the actual numbers, the budget proposals suggest that increased fares for higher class passengers along with higher volume of freight transport would be the key for meeting the growth targets for the year. The ministry seems to be hopeful of achieving an optimistic freight target of 450 m tonnes and through it, generate Rs 700 crore and another Rs 200 crore from the hike in passenger tariff rates.

The minister has, however, recognised the diversion of traffic away from rail transport, and has made several proposals to remedy the problem. The idea is to retain the freight of existing players and also venture into new areas of consumers goods transport. With the industralisation of our economy, railways have more become more and more marginalised, transporting only intermediate goods. The finished goods have been transported only by the roadways. This is in line with trends worldwide.

One way to attract traffic is not to adversely affect the special status given to the steel industry a couple of years back. The steel industry contributes less than 5 per cent of the total revenue earning traffic. But in recent months, the start of new plants near the markets have resulted in shift of some of the traffic to the roadways. The maintenance of a special status would definitely help the railways in trying to win back traffic from the roadways. Secondly, railways plan to run 40 contract trains every month to provide guaranteed transit services for expensive goods such as television, refrigerators and air conditioners. Traversing at 100 km per hour with wagons of new and advanced technology between Delhi and Jawaharlal Nehru Port in Mumbai, the transit time between Delhi and Mumbai would be around 48 hours compared to 95 hours. This could result in at least 9.5 million tonnes of additional freight that the railways plan to capture from the roadways. With revenues from this service being in the formof fees (since it would be run by Concor), the basic idea of trying to woo customers by providing less transit time and better service seems to be excellent one.

Thirdly, the minister has introduced the facility of two-point rake loading at some stations and supply of rakes in less than 48 hours. For users, this is a tremendous opportunity to supply multiple points from the same destination. Considering that today most consumer demand is for smaller batches of material at short notices, the proposals would make railways a preferred user compared to roadways.

Fourthly, the minister seems to have realised the tremendous advertising potential of the railways and has made a statement that they would raise the advertisement charges suitably.

But there appears to have been a misreading of the export-import markets. This is seen from two factors. One is that the budget has gone ahead with imposition of higher classification for washed coal. In both volume and value terms, coal freight is the single-most important commodity transported by railways. With coal alone contributing to 7,322 crore of revenues for the railways, an additional 4 per cent coupled with 5-6 per cent change in classification for washed coal would result in 10 per cent higher freight revenues for this category of coal transport.

Perhaps the basic assumption has been that the roadways cannot compete with railways on a sustainable basis, with the rail transport for transporting coal. With most of the consumers demanding bulk transportation, rail has an inbuilt competitive advantage. The railways obviously feel that any hike in transport cost of washed coal cannot result in shift of its revenues to roadways.

Unfortunately, data suggests otherwise. Data from CMIE shows that the southern railways had seen 150 per cent rise in volume of coal transport. This was primarily because many consumers shifted to imported coal and used the railways for transporting coal from the Vizag port to their plants. Such a step might force other inland consumers to evaluate the prospects of importing more coal. At the end of the day, the amount of coal transported may well be the same, but the distance transported might show a marked fall.

The same is true for iron ore. Although the classification of iron ore is quite low, it might have been well, had the budget spelt out lower rates for the beleaguered sector. Lesser rates might have resulted in enhanced volume traffic. Such rates could be changed once world iron-ore prices improve.

The biggest disappointment has been that the budget does not talk a word about any privatisation proposals. Going by the Japanese example, where the railways were split into six units and then privatised, the competition resulting from privatisation resulted in cost to end users falling by more than 25 per cent. A similar radical effort is needed for Indian Railways. Giving regional autonomy where zonal managers give volume discounts to users is not enough.