Railway Budget 2013 sets tone for austerity year

The government increased passenger fares for the first time in a decade in January, a move aimed at raising money for a ministry that spends more than half its Budget paying the salaries of 1.4 million employees and retired workers' pensions.

The last time a railway minister tried to do that - in the Budget last year - he was sacked within days following a political backlash. Indian rail fares can be very cheap: it costs as little as $9 to travel the nearly 1,400 km (870 miles)from New Delhi to the financial hub, Mumbai.

Bansal promised strict fiscal discipline in his ministry during a wide-ranging speech that referred to the cleanliness of railway linen and the safety of elephants straying on to the tracks, and even included lines from a famous poem about a train puffing uphill that sings "I think I can, I think I can".

But in a sign of tougher reform measures to come further down the line, Bansal proposed partially deregulating ticket prices, linking both passenger and freight rates to the cost of diesel. Earlier this year, India began a gradual deregulation of diesel, which is currently heavily subsidised.

However, Bansal only applied the fuel-linked increase to freight fares. He did not specify when passenger fares would be hit, or when the floating mechanism will be introduced.

"It does seem that he has ... tried to toe the line between the requirement of getting points before the election and looking at a better financial position for the railways," said Jyotinder Kaur, an economist at HDFC Bank.

DANGER

Bansal is the first railway minister to come from the country's ruling party in 17 years. The post is often doled out to junior partners of the ruling coalition.

Critics say successive rail ministers have used the post for political ends, laying tracks and wagon factories in their home states to win votes. This comes at the cost of upgrading a network that was mostly built before independence from Britain in 1947 and receives scant private sector investment.

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