Pitching for performance over populism, Finance Minister Arun Jaitley on Tuesday said that rail commuters must pay for the service they receive and that Railways’ non-core functions like hospitality services should be outsourced. Jaitley’s remarks assume significance as his thought process could well reflect in India’s first combined general and Railway Budget that he will present next year.
Besides, Jaitley pointed out how the aviation sector was giving Railways a run for its money. As things stand, the public transporter’s dynamic fare structure in Rajdhanis and Shatabdis sometimes result in tickets priced higher than airlines’.
“Railways got caught in a battle where populism prevailed over performance and the basic principle on which any commercial establishment is to be run, the first essential principle is that consumers must pay for the services that they receive,” Jaitley said with Railway Minister Suresh Prabhu in attendance.
“The core competence of railways is really to drive trains, to provide those services. Hospitality may not be the core competence of the Railways and therefore, what is not within its core competence, the principle of outsourcing — which is accepted world over — can be a logical addition to those activities of Railways,” Jaitley said.
He cited the example of power and highway sectors which started doing well only after consumers paid for services they got and said world over, only those services have succeeded where there is a financial model which says that consumers pay for what they receive.
The Government had in September scrapped the 92-year old practice of presenting a separate Railway Budget and decided to present a combined general and railway Budget for 2017-18 on February 1, 2017.
He said year after year, the success of Railway Budget was measured by subsidising consumers and making populist announcements regarding trains.
Speaking at a conference on Accounting Reforms in Railways organised by CII, Jaitley said unless the Railways strengthen its performance and internal management system, they will lose out to competition from other sectors like highways and airlines in passenger and cargo transportation.
Jaitley said that the shift towards accrual system of accounting from cash system will better reflect its performance. “Your accounting systems really must reveal more instead of concealing the reality. What is the kind of investment in infrastructure that is coming in, what is the kind of investment in Railway safety, what is the kind of outcome of outlay that you have planned, I think those accounts must really reflect the reality,” he said.
Prabhu said accounting reforms will help reveal the true picture of Railways and go hand-in-hand with accountability to have a huge impact on productivity. He said accounting reforms are part of the large agenda of railway transformation.
“It is a massive concept. It is just not confined to rituals to single to double entry and so on. We want to bring the real transformational concept. This is part of the large agenda of Railways transformation which includes ERP, complete transformation of Railways entire business is operated,” Prabhu said.
He said despite several suggestions for change in the accounting system in the past this has not been made. “We have decided to go ahead to have the entire discourses on the accounting reforms.” However, he said moving away from single entry to double entry in the accounting system is not a great achievement.
Taking a dig at the UPA Government, Prabhu said, “When the previous Government presented the first outcome budget it was awful because it was supposed to be an outcome budget but it was not.” “What we are now trying to do is to move to integrated activities for the outcome but beginning with budget,” he said, adding, “We have stakeholders, we have private investments we need transparency we need investors, they would also like to know how we are doing it.”