A Dozen Ideas

by Bibek Debroy - Apr 5, 2015 02:30 PM +05:30 IST
A Dozen Ideas

Bullet trains and travelling between two metros in eight hours are limited objectives. Let’s look at the bigger picture

What is Indian Railways (IR)? There is a reason why that question must be asked. There is a present structure of running trains (passenger, freight, parcels), delivered by a public monopoly (there are very limited exceptions) known as IR. There is no reason why delivery of railway services should be an exclusive monopoly of IR. However, 2020 is only five years away. I do not think a complete revamp of IR is possible in less than 20 years. Five years down the line, one can only have beginnings of that process. Hence, here are random thoughts on that process in 2020.

• There will be multiple providers of railway services, implying running of trains, not “non-core” bits. This doesn’t mean there will be private providers along every stretch and along every line, but there will be the beginnings of competition and choice.

• This means the Railway Ministry determines “policy”, not just for IR, but for private providers too.

• Once that policy has been determined, a regulator is created to ensure rules of competition, including fair access to track, are enforced. This isn’t a tariff regulator. Tariffs are determined by market forces. This regulator, independent of the Railway Ministry and the Railway Board, ensures fair competition and no more.

• IR, the public part of it, switches over to a commercial accounting system.

• IR sheds non-core activities like RPF (Railway Protection Force), medical services and running of schools. There are no market failures here. RPF is integrated with GRP (General Reserve Police) and state police. If IR wants security on its trains, it can choose whether to use the revamped RPF, CISF (Central Industrial Security Force), or private providers. Medical services are integrated with CGHS (Central Government Health Scheme) and supplanted by an insurance system, where those insured can go anywhere. The schools are hived off.

• Though slightly different and linked to running of trains, production of coaches, wagons and locomotives, aren’t core either. Hence, private entry into these is allowed, including leasing of coaches and wagons. (At best, one can go slow on opening up production of locomotives.) There are thus new production units in the private sector. The existing production units cease to be part of the IR system. They become independent corporations, competing on equal terms with private units to obtain orders from IR, or to export. As independent corporations, they are free to borrow and their pay scales and incentive structures are delinked from government systems. In addition, small bits of minority stake in these existing production units are sold to retail investors and a majority stake can be given (not sold) to state governments.

• What remains of IR is now governed by the Railway Board. This isn’t a corporate-style board, not by 2020, though that’s the direction in which one moves. The 16 zones (excluding Kolkata Metro) are rationalized and one goes back to nine zones. (All operational indicators were better then.) There is a similar rationalization of the 68 divisions.
There is substantial decentralization to the level of zones and divisions, so that the Railway Board ceases to interfere in operations. With greater decentralization to zones, it may be a good idea to have separate public corporations for owning track and IR’s rolling stock.

• While on rolling stock, since there will be private production too, the role of RDSO (Research Designs and Standards Organization) is restructured, with research delinked from standard-setting.

• After the switch to commercial accounting, there are clean figures on social costs (unremunerative lines/trains) run by IR. If these are subsidies for individual passengers, they should come out of the budgets of Union or state governments, and not borne by IR, which will be driven by commercial considerations. Such individual subsidies should be through direct benefit transfers to bank accounts. When the subsidies are collective, though direct benefit transfers are not possible, IR must be reimbursed by Union or state governments (suburban traffic).

• Thus, no gross budgetary support (GBS) is given to IR by the Union government. Nor is there a requirement to pay dividends. The existing loan (capital at charge) from the Union government is converted into equity.

• With IR tariffs (both passenger and freight) determined by commercial consideration and financial relationships with the Union government cleaned up, there is no need for a Railway Budget.

• The different streams of entry into Groups A and B (gazetted category) of entry into IR services are unified into one, delinked from the Union Public Service Commission (UPSC) and government pay scales.

This breaks down silos and departmentalism in IR. Moving upwards, the Railway Board is restructured, breaking down silos again and paying greater attention to issues like getting business, partnerships with the private sector and technology acquisition. Recruitment to Group D is completely phased out and the intention should be to delink Group C from Railway Recruitment Boards.

This is my list of 12 and you will complain.

What about high-speed travel?

What about travelling between two metros in eight hours?

I think those are limited objectives. My agenda for change is broader.

Bibek Debroy is a noted Economist. His 10-volume translation of The Mahabharata is one of the most seminal works in contemporary Indology. He was a member of the Swarajya Advisory Board.
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