Was It All Track-II?

• Rs 9,000 crore pension funds shown as cash surplus
  
• Miscellaneous funds-Rs 2,500 crore-included in earnings
  
• Rs 1,700 crore due to the Indian Railway Finance Commission as dividend for lease of wagons put in the profit account
  
• Profits shored up by showing advance earnings for 2007-2008 in last year's balance-sheet
  
• Monies in the suspense account-funds promised but not yet transferred-reflected in the earnings/profits
  
• Tonnage carried by freight trains raised despite repeated objections and safety concerns. This brought in Rs 5,000 crore.
  
• Hidden costs to passenger tickets earned the railways Rs 325 crore

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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.

• 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.

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.

TheIIM study did make Laloo the man of the moment. So much so, visiting students from the Harvard Business School, Wharton andMIT 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 theMIT 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.