Railway Budget 2008 - 09 By Mr lalu Parsad Yadav Railway Minister

 The government is likely to reduce some passenger fares and freight rates when it unveils annual plans for its huge rail network on Tuesday, moves which could ease rising inflation and help it at elections.

For long plagued by losses and delays but now seeing a resurgence, Indian Railways runs more than 14,000 trains a day, and cutting fares would help tackle price pressures and woo voters ahead of national polls due by May 2009.

"The Railway Budget should focus on efficiency, and rationalise fare and freight structures, which will help in its modernisation and expansion drive," said TK Bhaumik, chief economist with top conglomerate Reliance Industries.

"Freight charges contribute to transport costs for industry and so they are linked to inflation. I hope the budget will help stabilise the transport costs and prices."

Annual wholesale price inflation in Asia`s third-largest economy ticked up to a six-month high of 4.35 percent in early February, pushed up by higher food and commodity prices.

With an increase in retail prices of fuels yet to feed into the data, analysts see the reading creeping close to the central bank`s fiscal year target of 5 percent in the weeks ahead.

With millions of poor consumers -- and voters -- to consider, analysts expect this year`s rail budget and Friday`s federal one from the communist-backed ruling coalition to be populist.

Last year, Rail Minister Lalu Prasad Yadav cut freight rates for a string of fuels and minerals by between 5-6 percent, and outlined plans to modernise the century-and-a-half-old network, one of the world`s largest.

He also announced marginal cuts in some passenger fares.

"He might do something similar this year to please the poor and the middle class," NR Bhanumurthy, economist at the Institute of Economic Growth (IEG).

The government wants to build up the Railways to meet the demands of the fast growing economy, which is expected to see growth moderate to a still pacy 8.7 percent this fiscal year.

Passengers, freight up

In the April-November period of this financial year, the Railways carried an average of 18.5 million passengers a day, a rise of 5.6 percent from the year before, Railways` data showed, and more than the populations of Sweden and Norway combined.

Freight tonnage in the nine months to end-December rose 8.2 percent from same period of 2006/07. India`s financial year begins on April 1.

The state-run network`s earlier reputation for red-tape and inefficiency saw it losing freight traffic to trucks and passengers to a fleet of new, cut-price air carriers.

But analysts say the rail network now has a cash surplus of nearly USD 2.5 bn, having turned itself around in recent times.

Despite that success, roads still carry 85 percent of India`s passenger traffic and 75 percent of its freight.

In the past two years, the railways has been innovative in its bid to turn a profit, from introducing competitive bidding for catering to leasing out advertising space on railway buildings, stations and some trains.

The Rail Ministry is trying to increase its share of freight by cutting costs and turnaround times, appealing to businesses frustrated by the slow movement of goods.

Analysts said the Budget would also focus on speeding up work on two dedicated freight corridors that will connect the country`s north with its western and eastern industrial hubs.

"Railways need to be more competitive vis-a-vis other modes of transport," the IEG`s Bhanumurthy said. "The main objective of building the freight corridors is to boost economic growth."

JP Chowdhary, chairman of Titagarh Wagons Ltd, said his firm, which makes freight wagons, was expecting innovative schemes, especially on private-public partnerships, to speed up work on the projects, which will cost USD 7 bn.