The railways operate more than 12, trains, carrying some 23 million passengers daily. This vast public enterprise is virtually a state within a state. It runs schools, hospitals, police forces and building companies and employs a total of 1. It is in need of modernization.
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The railways operate more than 12, trains, carrying some 23 million passengers daily. This vast public enterprise is virtually a state within a state. It runs schools, hospitals, police forces and building companies and employs a total of 1.
It is in need of modernization. The high-level railway restructuring committee, chaired by noted economist Bibek Debroy, has recommended drastic reforms in the cash-strapped Indian Railways by suggesting to allow privatisation of railways to run passenger as well as freight trains, producing coaches, wagons and locomotives and switching over to commercial accounting of railway functions. This large multiplier has been increasing over time, and the effect is greatest on the manufacturing sector.
The committee recommended unifying and streamlining the process. There is also a small but significant element of recruitment of Mechanical Engineers through the Special Class Railway Apprentices examination, followed by training. The eight services can be broadly categorized in two bigger groupings viz. Focus on non-core areas: Many tasks carried out by the Indian Railways are not at the core of the prime business of rail transportation. These activities include running hospitals and schools, catering, real estate development, including housing, construction and maintenance of infrastructure, manufacturing locomotives, coaches, wagons and their parts, etc.
To this list must be added the Railway Protection Force and Railway Protection Special Force, which carry out functions which should normally be performed by State Police forces, or conveniently outsourced.
To maintain and run these diverse sets of peripheral activities, Indian Railways has created a monolith organizational structure. There is a strong case for revisiting these activities. Indian Railways should focus on core activities to efficiently compete with the private sector. It will distance itself from non-core activities, such as running a police force, schools, hospitals and production and construction units.
Immediate integration of the existing Railway schools into the Kendriya Vidyalaya Sangathan set-up. Needs of the children of Railway employees could be met through subsidizing their education in alternative schools, including private schools. Indian Railway Manufacturing Company: Wagons are already produced by the private sector. Coaches and locomotives could follow. Unless they are freed from constraints, the existing production units will be unable to face this competition.
All the production units, all the production workshops whether it is coaches or locomotives must be under Indian railway manufacturing company. This is an institutional reform, not privatisation. Encouraging private entry: Private entry into running both freight and passenger trains in competition with Indian railways should be allowed and private participation in various Railway infrastructure services and non-core activities like production and construction, should be encouraged by the Ministry of Railways.
The reason private players find it unviable to operate is because they do not have access to the tracks. They do not have access to tracks because Indian Railways gives preference to the Indian Railway trains. Therefore, Debroy committee recommended having a separate track holding company, which remains public, from that part of Railways which runs trains.
This track holding company will be neutral between Indian Railways and the private players. RRAI, an independent regulator: Shift regulatory responsibility from the government to an independent regulator as the private sector will only come in if there is fair and open access to infrastructure.
The independent regulator shall ensure fair and open access and set access charges; establish tariffs; and adjudicate disputes between competitors. This will make fair and open access a reality and open up both freight and passenger trains, in competition with IR.
The RRAI will have the powers and objectives of economic regulation, including, wherever necessary, tariff regulation; safety regulation; fair access regulation, including access to railway infrastructure for private operators; service standard regulation; licensing and enhancing competition; and setting technical standards.
It should possess quasijudicial powers, with appointment and removal of Members distanced from the Ministry of Railways. There are too many Zones and Divisions and thus a rationalization exercise is required. Suburban railways should ideally be hived off to State governments, via the joint venture route. While competition makes efficient service delivery better and helps railways raise resources for reinvestment for modernization, criticism is that social commitments may take a hit; and privatization that hurts workers may be under contemplation.
PM Modi ruled out privatization. The Committee has recommended restructuring in a way that the government is only responsible for the Railway sector policy.
This will give autonomy to IR and encourage private investment.
Bibek Debroy Committee Report: An Analysis
The independent regulator shall ensure fair and open access and set access charges; establish tariffs in cases where there the market fails to discover a price; and adjudicate disputes between the track-owning organization and train operators; and between competitors. This will make fair and open access a reality and open up both freight and passenger trains, in competition with IR. Transition to commercial accounting Indian Railways should shed its complicated accounting and move to standard commercial accounting by following principles and norms accepted nationally and internationally. Appropriate financial disclosures will facilitate investors in assessment of risk and taking decision to invest in Indian Railways.
Bibek Debroy Committee Recommendations