The record of Indian Railways (IR) in implementing new initiatives announced with fanfare is not very encouraging.

The announcement in December 2019 for restructuring its organisation, including unification of its eight existing services as IR Management Service, is in doldrums.

While there is some movement towards new induction of officers through an IRMS examination, barring redesignating the Chairman as Chairman cum CEO, its departments continue to work is silos without any restructuring of hierarchy and functions.

In August 2021, the government announced National Monetisation Pipeline (NMP), which included monetisation of railways’ brownfield infrastructure assets to garner ₹1.5-lakh crore in four years, with railway assets contributing 26 per cent of the ₹6-lakh crore NMP. A debate ensued on political lines about the intention of the government, dissecting the nuances between privatisation and asset monetisation.

Damp squibs

When it comes to IR, however, the debate should not be on the merit of the plan, which seems largely purposeful in view of IR’s financial woes, but on whether IR has the ability to go through with the exercise. So far, most PPP projects of IR have been damp squibs.

Take the case of its plan announced in January 2020 to allow private players to operate trains on certain routes with revenue-sharing to finance IR’s infrastructural projects. After the prospective bidders gave it a thumb down due to one-sided bid conditions, there are no signs of a meaningful revival of the process and so a progressive concept has met a dead end due to its fossilised bureaucracy.

A report by Sanjeev Sanyal, Principal Economic Advisor, Ministry of Finance, ‘Rationalisation of Government Bodies: Proposal for Ministry of Railways’ , wherein it seeks to right-size various IR entities, including its PSUs, through closures and mergers, surfaced recently. While the proposals for some of its smaller entities and functions are of limited consequence, those involving its PSUs are significant.

Acts as controller

Nearly all its PSUs are now listed companies, mostly listed in recent years, perhaps with a view to disinvestment, or even sale, in the long term. The problem is that the rail ministry still acts as the monitor and the controller of these PSUs.

Insensitive to the fact that these companies have a large shareholder base, IR has not yet learnt to act a responsible majority shareholder with hands-off relationship with the functioning and finances of the companies.

Indian Railway Station Development Corporation (IRSDCL) was closed down this month with its mandate transferred to railway zones, defeating the very philosophy of focussed execution by a company.

Although the progress of the oft-touted station development work has been tardy with only two stations done so far against hundreds announced, experts believe that further progress would be even slower as the focus of zones is in operation of trains and not in building infrastructure.

The strategic sale of IR’s CONCOR, a near-monopoly as the plans to open up containerised rail freight turned out to be a half-hearted exercise, is hanging fire for two years, lost in inter-ministerial pettifogging on land lease rates.

The IRCTC story

Two cases in the last week of October 2021 are alarming. Indian Railway Catering and Tourism Corporation (IRCTC) was listed in October 2019 and at that stage it was free to fix the convenience fee it charges on the online booking of tickets and its quantum. Although IR used to get a share of the revenue prior to 2016, at the time of listing there was no such regime and it would be a reasonable assumption by all shareholders that it would continue to be so.

On October 27, however, IR instructed IRCTC to share half of this revenue with it from November 1. Late on October 28, IRCTC informed SEBI about it. Meanwhile, the IRCTC stock closed 11 per cent higher on 28th following the announcement of a split of its shares albeit with volatility.

But October 29th was mayhem as its share price crashed over 27 per cent and within hours of the stock’s free-fall, the decision was withdrawn by IR and then the price regained most of the loss. Such volatile play of a share price clearly shows immature handling of its PSU by IR and even the possibility of foul play cannot be denied.

Then the announcement that all PSUs of IR, particularly RVNL, IRCON, RAILTEL, etc., would no longer be awarded any contract by IR on nomination basis but in competition with private sector.

As per the recent rating for 2019-20 by the Department of Public Enterprises, RVNL is the top PSU of the country and IRCON also fares very well.

The Sanyal report proposes merger of these two which may not be a bad idea because their domains are similar — civil and allied infrastructure, although RVNL duplicates a lot of work of IR’s own Construction Organisation whereas IRCON has a market standing outside railways too with a portfolio of foreign projects also.

What complicated the matter was both IRCON and RVNL went public declaring themselves as higher than the other in valuation. The recent announcement, however, became self-defeating as it would potentially wipe out the order book of RVNL of ₹80,000 crore to ₹25,000 crore.

IR is a behemoth burdened with a host of financial and operational issues. Having corporatised many of its functions through creation of PSUs, and listed most of them on the stock exchanges, it would do well to let these PSUs function independently. It should tread the path of their closure and merger with greater diligence, otherwise the marginal gains would not be able to offset the loss in valuation of these companies, which, after all, is a lot about perception as well.

Mani is an independent consultant and former GM, ICF, and Luthra is retired CAO/DMW, IR, Patiala

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