Rebooting the Railways

As a former banker, Railway Minister Suresh Prabhu will realise better than anyone else the true cost to the economy of inefficiency and delay in the creation of public infrastructure. According to Planning Commission data, as many as 274 of the 289 Railway projects under implementation, or 95 per cent of all live projects, are delayed, some by as much as a decade or more. Many of the projects were planned much earlier but never got off the ground given the chronic shortage of funds for investment, thanks to rampant misallocation and misuse of resources for populistic projects by a succession of Railway ministers. Almost anything planned such a long time ago is bound to be hopelessly inadequate, given the speed with which the country’s economic landscape and connectivity requirements are changing. Add the delays, and it’s a near certainty that when these projects eventually do get completed, they will not be able to meet the demands placed on them, or worse, become irrelevant.

That kind of stress is already threatening to unravel India’s colonial era network. According to a recent PwC estimate, a quarter of Railway infrastructure is already being sweated beyond its maximum overload capacity. Worryingly, another 50 per cent of capacity is almost at that limit. Such stress has caused a rising number of accidents, earning the Indian Railways the sobriquet of the world’s most dangerous railway network. The need to repair, strengthen and modernise its infrastructure has reached alarming proportions. More than a fourth of the 1,30,000-odd railway bridges in the country, for instance, are more than a century old. Passenger amenities are basic, with a vast majority of train toilets nothing more than a hole in the floor. The scale of work required to tackle these challenges is daunting. The Kakodkar Committee on Railway Safety had recommended investments of over ₹1 lakh crore to upgrade safety measures and eliminate unmanned crossings. The Sam Pitroda Committee on Railway Modernisation had estimated investments of over ₹5 lakh crore. The Railways’ own Vision 2020 document, released by then Railway Minister Mamata Banerjee, estimates an annual investment of ₹1.4 lakh crore over a decade to meet its goal of upgrading the network.

These kind of investments are simply not possible given the parlous state of Railway finances. Its operating ratio is around 92.5, which means that the Railways is spending over 92 paise of every rupee it earns just to keep operating. There has been much talk of opening up to foreign investment, but most proposed foreign investments have foundered, thanks to an entrenched bureaucracy wary of losing control. ‘Social’ arguments have been used to defeat attempts to run the Railways on more commercial lines. As global experience has shown, privatisation has led to better services and lower costs for users, while there are enough options available for targeted subsidy delivery to the needy poor. It is time for bold reform.

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