Indian Railways must be revamped carefully

| Updated on December 25, 2019

Managerial reforms are needed, but positives shouldn’t be sacrificed

In a bid to end ‘departmentalism’ in Indian Railways (IR), the Cabinet has agreed to reduce the number of Railway Board members to five from the existing eight, and integrate the eight railway services into an ‘Indian Railways Management Service’. This is in line with the recommendations of numerous committees, notably the one led by Rakesh Mohan (2001), from which the latest report on the railways drawn up by the Bibek Debroy panel (2015) draws a lot of cues. The integration of departments, which is yet to happen, will cut the clutter in decisionmaking and organise the working of the Railway Board and its zones along more commercial lines. The lack of coordination between the maintenance and traffic staff is said to have played a role in the Khatauli rail mishap near Muzaffarnagar in August 2017. But perhaps the Centre should have decided to create the new departments before integrating the services, in order to dispel confusion among employees.

The moot question is whether the Centre plans to bifurcate the Railways into ‘infrastructure’ and ‘operations’ entities, and hive off so-called non-core activities such as running hospitals and schools, besides railway workshops and maintenance yards as recommended by the Debroy panel. The latter could prove counter-productive, as it will dismantle entire townships, and with it ancillary industries, while bringing uncertain benefits in financial or efficiency terms. However, any move towards professionalisation of the Railways, with the entity maintaining an arms-length distance from the government in decisionmaking, including raising passenger fares, will help. The Railway Board can rope in professionals from other fields. It is possible to achieve efficiency gains by undertaking managerial reforms, and yet not be as disruptive as the Debroy report suggests.

The problems of IR, a mammoth organisation which employs 13 lakh people and moves about three million people a day with a workaday efficiency, are essentially a result of the nature of its costs. If its operating ratio is an unflattering 98.4 per cent, that is essentially because salaries and pensions account for well over 60 per cent of its costs (a result of the Pay panel awards), while fuel accounts for another 22 per cent. This leaves little funds for investment in maintenance and creation of fixed infrastructure and rolling stock. Besides, crucial posts in various departments are left unfilled and their functions carried out contractually, which gives rise to questions of accountability and quality of work. On the revenue side, freight earnings do much of the heavy lifting (over 60 per cent of revenues) while passenger services account for about a quarter. This mix needs to be corrected for the impact on industry and the loss of fuel efficiency as freight moves to road transport. Prudent borrowings to undertake investments, rather than pursue prestige projects, will bring in long-term gains to the economy. The long-term gains of a railways-driven economy cannot be gauged by financials alone.

Published on December 25, 2019

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