Govt cuts rail fares as elections approach

NEW DELHI - The government unveiled modest cuts to most rail passenger fares on Friday with an eye on fast approaching national elections, but kept freight rates unchanged despite growing signs of strain in a faltering economy.

Rail Minister Lalu Prasad, using his trademark humour, rolled out the interim rail budget for the next fiscal year to March 2010, and said slowing economic expansion, higher wages for staff and lower passenger revenue growth could pull down net revenues.

But he announced 43 new trains and said the railways would pay a dividend of 53.04 billion rupees ($1.09 billion) to a cash-strapped government, which will outline its interim budget on Monday.

"The same railways which faced a paucity of funds for replacement of over-aged assets in 2001 ... have now surprised the whole world with a historic financial turnaround," Yadav told lawmakers.

Prasad forecast the railways -- one of the world's oldest and largest networks and which carries about 18 million people a day -- would load 910 million tonnes of freight in 2009/10, up 60 million tonnes from this fiscal.

Passenger traffic in a country of more than a billion people, for many of whom rail is the only affordable means of long-distance travel, was seen growing by around 7 percent.

Prasad heads a regional party which is a key member of the ruling Congress party-led coalition and with a general election due by May much of his speech focused on projecting the achievements of the past, touting a financial turnaround for the century-and-a-half-old network and cheaper fares.

The railways forms an integral part of Indian life carrying freight and passengers from icy heights of Kashmir to the sunny beaches of Kerala.

But financial markets were looking ahead, with the main share index rising 2 percent by early afternoon on hopes of further stimulus measures for the economy in Monday's mini budget, when rescuing flagging growth and stemming job losses are expected to take centre stage.

CHEAPER TRAVEL

The government estimates that growth in Asia's third-largest economy will slip this fiscal year to 7.1 percent from 9 percent or more in the past three years.

Data has already shown the global slowdown is hurting key sectors including exports, housing and manufacturing.

A full budget for 2009/10 will be presented by the government which forms after the polls, campaigning for which is heating up.

Cheaper class tickets for trips longer than 10 km (6 miles) and costing up to 50 rupees ($1) were reduced by one rupee, while more-expensive air-conditioned and ordinary seats on a range of trains were trimmed by up to 2 percent.

The railways has had to take on stiff competition from low-cost airlines in recent years, but job insecurity and costlier plane tickets have made many look again at rail travel.

The government said feasibility studies for operating "bullet trains" such as those which race travellers across parts of Europe and Japan had begun and a survey for 14 new lines had been undertaken.

Prasad said work had started on a dedicated freight corridor linking key areas of economic activity in the east of the country, while construction on a western line would begin later this month.

Financing for the project from a Japanese funding agency to the tune of 200 billion rupees would likely arrive by the end of 2009, the minister added.

India is on a drive to improve its creaky infrastructure and boost rail connectivity between industrial hubs and major ports to bolster economic expansion and improve supplies.