Why a rail development authority?

The decision to set up the Rail Development Authority of India is being seen as the most important action taken so far to bring about institutional change for reforms in the biggest departmental undertaking of the Government.

If the authority does become all that it is being cracked up to be in news reports based on official briefings, then that is all for the good. But the first point to note is that it is being called an ‘authority’ with the word ‘regulatory’ not there in its name, as is the case, for example, with the insurance or telecommunications regulators.

To go behind nomenclature into substance, let us take a look at the press release outlining what the authority will do. These can be divided into two categories.

Some of the regulatory functions listed are: pricing of services commensurate with costs, protection of consumer interests (‘rights’ would have been a better word), ensuring competition, creating a positive environment for investment, and providing a framework for non-discriminatory open access to the dedicated freight corridor.

Some of the developmental functions listed are: promote efficiency and economy and absorption of new technology (to deliver on quality of service and cost optimisation), market development, benchmarking of services against international norms, and human resources development. So far so good but there is a total giveaway in the last sentence. Towards these ends the authority “shall make recommendations to the government for appropriate consideration/decision”.

Thus, the Rail Development Authority will do all kinds of sums and lay down all kinds of norms but at the end of the day it will be an advisory body. It will be up to the railway minister of the day to accept the authority’s advice or not. As ministers and governments come and go the threshold of willingness to accept advice will rise and fall. An ‘advisory regulator’ is an oxymoron, a contradiction in terms, like say, ‘virtual reality’.

The authority will have five members, including a chairman, who will be identified by a search and selection committee headed by the cabinet secretary and three others, all from within the Government. Among them will be the chairman of the railway board who will in a sense find persons from whom he will take orders up to a point.

The chairman and other members of the authority will naturally have special knowledge in fields like infrastructure, railways, law and even consumer affairs. But, it is to be noted, none of the selectors will be an eminent non-government person in the field of consumer affairs.

It is to be hoped that the authority will in good part act as an adjudicatory body which will give an award in, let us say, a dispute between the railways and a concessionaire like a freight train operator or a special purpose vehicle. In the railways concept paper on the basis of which the authority has been approved, the word ‘adjudication’ does not appear but ‘adjudication fees’ as a source of revenue does. We can assume that what emerges from the exercises of the authority and its appellate body will have the necessary finality. But it remains to be seen how much of an adjudicatory, as opposed to a developmental, role the authority finally has.

It is important to raise these issues because the railways, particularly well-spoken reform-minded railway ministers, have been long on the need for reform but till now little has changed. In fact, the merging of the railway budget with the Union budget has been a retrogressive move. A clear casualty has been easy accessibility of data.

Till last year’s budget, a lot of data used to be easily available through the explanatory memorandum which this year is difficult to find. It is not that the data cannot be culled from elsewhere in the general budget papers but not as easily as before. Particularly useful was the table on ‘Railway Funds’ with the closing balance telling you if the funds were being drawn down or not. This readily accessible table is no longer there. According to a former financial commissioner, the railways have become much more “opaque”.

Among the power of the authority, the concept paper mentions “dissemination of information”. It will publish reports and investigations and, in particular, convey its decisions through publicly available documents. What is important is a public discussion on an issue before a decision on it is taken. If the authority makes the railways less opaque, then that will be a great plus.

The need for a regulatory authority had become acute over the years with railway ministers refusing to raise passenger fares, thus leading to freight revenue subsidising passenger traffic more and more, and consequently adding to the costs of industry. It was then felt that if an independent regulator handed down a revision of fares and freight rates which the railways had no option but to accept, then that would take the political sting out of the decision.

But today the situation has changed. With the number of passengers using the railways stagnant in recent years and freight carried last year not even reaching the previous year’s level, market conditions are such that raising fares or freight rates at this juncture will drive away business even more.

The need of the hour for the railways is not the ability to raise prices (fare and freight rates) but the ability to cut costs and canvas for fresh business. This will come from the organisation being corporatised and made to function professionally. If you need proper corporate planning and forecasting for that then it can be done in house. There is no need for a separate think-tank in the form or a development authority to deliver that.

The writer is a senior journalist and the author of ‘Made in India: A Study of Emerging Competitiveness’

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