A two per cent cut in passenger fares across the board for railway travel

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is neither populist nor aimed at garnering votes," railway minister Lalu Prasad told media after presenting his budget on Friday.

Patting himself on the back, he went on, "This is the sixth time in succession I have not increased fares. Rather, every time I have cut fares and freight tariff."

In the process, however, the railways will sacrifice Rs 700 crore in revenue next year alone. How he manages to keep railway finances well balanced in the face of fare cuts year after year has been a subject of case studies in management schools. This time we know. His budget makes serious attempts to increase revenue by improving efficiency and productivity of 1.4 million personnel.

Lalu cannot but be populist. Even in his budgets. The strain is showing. Cash surpluses generated by the railways, a key pointer to Lalu's success as head of the ministry, tell a different story. The healthy Rs 13,431 crore surplus in 2007-08 has been dwindling. In the current year, the figure is down at Rs 6,355 crore, much less than the target of Rs 11,786 crore. Next year, it will be still less at Rs 5,572 crore.

In his budget speech, Lalu conceded that it would be a big challenge to sustain the growth momentum and put the railways on a higher growth path.

Revenues from second class passengers, Lalu's vote bank in Bihar and, along with freight, the mainstay of the railways, have begun to fall, though marginally. In 2008-09, the revenues missed the target of Rs 17,645 crore by Rs 200 crore. Earnings from sources other than passenger and freight tell the same story.

The minister has projected revenue of Rs 6,000 crore from sundry earnings in 2009-10. It may not be met, judging by past record. In the current year, it is only Rs 3,250 crore. In 2007-08 the fugre was Rs 2,565 crore, when the target was Rs 5,000 crore.

The strain will surely be accentuated by the wage bill of the 1.4 million staff and the pension bill of 1.1 million after the implementation of sixth pay panel report. Lalu's budget said the salary bill would be Rs 9,000 crore and the pension cost Rs 4,500 crore.

He trumpeted the Rs 90,000 crore generated as cash surplus in the five years he has held the ministry. But the fact is the railways continue to depend on budgetary resources from the Union government. At least 28 per cent of this extra support will come from the Union government to get the railways' annual plan of about Rs 37,905 crore going.

The planned introduction of new services -- 43 new trains, 15 extensions, increased frequency of 14 trains -- and the announcement of a survey for 14 new lines could be seen as less financially prudent and more geared to please voters. But every railway minister before him relied on the same populist trick.

The ambitious plan of investing Rs 2,30,000 crore in the 11th plan will also mean that the railways will have to forever find new revenue sources.