How to put the Railways back on track

Mamuni Das | Updated on April 29, 2014 Published on April 29, 2014

Turning the behemoth into a growth engine requires fundamental reforms

In a recent interview, Narendra Modi branded the Railways as a potential “engine for India’s growth”. Unfortunately, he stopped at that, without sharing a specific plan of how exactly he intended to ensure this. But any sort of re-energising of this behemoth —with an employee base of 14 lakh — requires some immediate fundamental reforms that cannot be ignored.

If Modi comes to power, here’s a list of ten things he can do.

Accounting: Implement the long pending accounting reforms to know the cost and revenues of different service segments such as freight and passenger. The Railway has spent years studying accounting reforms, without implementing any. This exercise will also help the proposed railway tariff regulator.

Compartmentalise: Separate the commercially-oriented services from the socially-oriented ones. This can be done in both passenger and freight segments. If some of the socially oriented services are loss-making, work out ways to address them. If the Government wants them to continue, it should bridge the revenue gap.

Cut flab: Reorganise and downsize the bloated Railway Ministry, so that inter-departmental fights do not work to the detriment of the system as a whole. This is how the Ministry is organised now: the Railway Board and its almost 40 sub-departments report to the Union Railway Minister. The Board has seven Secretary-rank posts and the sub-departments have almost 100 officers of the rank of Joint Secretary and above. These departments are staffed by various service cadres, such as mechanical, electrical, signalling and telecom, traffic, finance and civil engineering.

Proposals getting delayed or killed because of inter-departmental rivalries is common, as a key motivation is to ensure that the scope of work of a particular department should not shrink. Such departmental rivalries can be killed by merging cadres after 20 years of specialisation. This will also create departments based on service segments for decision-making and destroy the cadre-based ones. Moreover, as most of the operational work for the Railways happens at zonal levels, it is advisable to reduce interference from headquarters and strengthen zones.

People across the Railway rank and file privately agree on the need to restructure and cut flab in the Board, though they differ on the kind and extent of surgery.

Invest more: The Government should increase investment in the Railways but with a condition on expected returns from the Railway Board. This will guard against the routing of scarce investments into VIP constituencies driven by political considerations. After paying its staff, fuel and pension bills, there is hardly any money left with the Railways for capital investments. It must at least route them into right causes instead of spreading them thin across projects.

Also, whenever a rail line is extended with Government funds and there are large upcoming industries such as power plants which benefit, the industries can be made to chip in towards some part of the cost.

Strategic areas: The Government should continue extending support for investments in strategic lines such as Jammu and Kashmir and the North-East.

Private participation: Target private and foreign investments for the Railways. But, first, rework archaic rules and provide the investors a level playing field so that they come in. Many private investors who invested in the railways have horror stories to share.

Corporatise: Make the Railway Board responsible and accountable, but do not rush into mindless corporatisation. Think Air India, BSNL, MTNL, Prasar Bharati, etc. Corporatisation without insulation from political interference is no good.

Dynamic pricing: Make freight pricing more dynamic. In the last two years, when there was an economic slowdown, forcing lower truck rentals, the Railways simply held on to their freight prices and even hiked the rates despite holding spare capacity.

Subsidies: Devise ways to target passenger subsidies better. Not all non-AC travellers are poverty-stricken, nor are all Garib Rath users poor. This may take time — but identify the poor, maybe with the use of Aadhaar — and make subsidised travel the exception rather than the norm.

Politicking: Spare the Railways from coalition politics. As it is, Railway reforms are difficult and need strong leadership and will. But even some minor, commercially-oriented reforms that should have been done by now have been hit by coalition politics as the Railway portfolio was used as a bargaining tool by the ruling party to gain support from coalition partners.

In the BJP-led NDA regime between 1999 and 2004, BJP leaders held the portfolio for less than three months. Similarly, in the ten-years of the Congress-led UPA regime, Congress held the portfolio only in the last two years, after its coalition partners walked out.   

As for the prime ministerial candidate’s utterances, here is a gentle reminder. There was another Minister who made similar statements. In an interview to Business Line on January 25, 2012, Dinesh Trivedi had said that the Railways can be the engine of growth for the world, not just India. When he presented his reform-oriented plans in the Budget a month later, he was shunted out by his own party, and replaced by another who rolled back the reforms.        

Published on April 29, 2014

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