Revving up the Railways

Identifying the problem is half the solution, which is why the Business Plan for FY18 recently unveiled by the railway minister is an impressive document. It is also a far more useful document than the now-defunct railway budget, which used to dwell mainly on railway finances and new train launches without presenting any long-term action plan. The new business plan dissects bottlenecks to the Railways’ financial turnaround, and offers detailed solutions over the next five years. Should the Railways succeed even in executing half of these plans, it would have made significant progress in transforming itself from a public sector white elephant into a successful commercial enterprise.

Railway finances are currently hobbled by unviable tariffs. But the plan correctly recognises that better amenities, on-time performance and safety improvements are essential before the Railways can hike user tariffs. Thus it plans a massive ₹8.5-lakh crore capital infusion in five years with clearly identified project milestones. Rightly assessing that high-yield freight traffic needs to be its breadwinner rather than passengers, it plans to diversify its goods basket — now over-reliant on commodities — into value-added white goods and vehicles. To woo industrial consumers, volume discounts, long-term freight contracts and assurances on rakes and transit times are planned. Innovative ideas have been mooted to transform the Railways from a bare-bones freight operator into an end-to-end logistics solution provider to industry. Investments are afoot for last-mile delivery by offering warehousing, terminal capacity, road-railers. Roll-On Roll-Off services allowing trucks to bypass congested cities are on a trial run. To monetise assets and open up new revenue streams, consumer firms will be invited to co-brand key trains. However, impressive as these ideas are, with limited budgetary support from the Centre, it is the Railways’ ability to find the capital to upgrade its creaking infrastructure that will hold the key to actualising these plans. Given its sovereign backing, Indian Railways can easily explore retail bond offers to raise capital.

While it is clear that the Railways is now being steered in the right direction, the Centre needs to play a more supportive role. For one, proceeds from listing lucrative railway PSUs such as IRCTC, IRCON and IRFC must be segregated and made available to the parent for its capex plans. Two, with an operating ratio of over 94 per cent, the Railways urgently needs to raise passenger fares, downsize its workforce and introduce performance-linked pay. Such tough measures will not make for good politics; nevertheless the Centre must grant the Railways autonomy to implement them. Finally, having done away with a railway budget, the Centre must refrain from announcing populist giveaways at the organisation’s expense to earn political brownie points. The 2017 budget sop, which waived service charges on e-ticketing and dealt a body blow to the profitable IRCTC, is the kind of move best avoided.

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