Friday, June 12, 2015

A Tata train in the offing? Panel report seeks to overhaul Indian Railways

by FP Staff  Jun 12, 2015 A government panel set up to study restructuring of Indian Railways and Railway Board has asked the government to open up the sector for more private sector participation even in passenger segment, say media reports.

The panel, which has set a five-year roadmap for bringing in the reforms, is also for hiving off of non-core, non-remunerative operations and corporatisation of the railways and also make it just another train-service provider, says reports in The Times of India and The Indian Express.
The panel is set to submit its final report today to the government.
The recommendations, if accepted and implemented by the government, will change the face of a transporting system, which has been crying for changes for decades now.
The lack of resources and a rigid mindset of successive governments have held back any meaningful reform in the system that carries about 23 million passengers and 3 million tonnes of freight on a daily basis.
The panel headed by Bibek Debroy, a member of NITI Aayog, was set up by the Narendra Modi government and and included KM Chandrasekhar, former cabinet secretary, Gurcharan Das, former CMD of Procter & Gamble and Ravi Narain, former MD of the NSE, as members.
Here are the key recommendations in the report as reported in the media.
1) A Tata train in the offing? The most significant recommendation of the panel, according to a report in The Times of India, is to allow private players to enter the passenger trains segment. Until now there have been talks of allowing private sector players in freight, this is the first time the sector's participation in the passenger segment has been mooted. If the government accepts it, you could well be waiting for a train run by a corporate body at a swanky railway station in five years.
2) No privatisation: Does this mean the panel wants the Railways to be privatised? No. Privatisation involves sale of equity. The Times of India report has categorically said the panel did not recommend privatisation of the Railways, it just endorses private entry. "...The is already part of the accepted Indian Railway policy with the provision of an independent regulator", it cites the panel report as saying.
3) Exit non-core activities: Non-railway operations of the railways include, running schools, hospital, stadia, catering, real estate development and also the Railway Protection Force. The Times of India says the panel is for hiving off of all these. These have been termed non-remunerative activities.
4) Independent regulator: According to the The Indian Express report, the panel is for putting in place a quasi-judicial Railway Regulatory Authority of India. In fact, establishment of an independent regulator for railways is basic requirement to bring about any reform in the system. As per the report, the regulator should, apart from resolving disputes, also set technical standards and freight rates. When it comes to passenger fares, however, the panel seems to be giving a miss to the reforms aspect as it says the regulator's recommendation (to increase fares or not) should not be binding on the ministry.
5) Scrap the railway budget: Once the regulator is in place, the government should do away with a seperate budget for railways. This has been a long pending demand by many experts. As Firstpost editor R Jagannathan has noted earlier, "It is a needless indulgence used by politicians to make populist speeches to try and buy votes".

6) Too big to handle: The panel has also pin pointed the biggest hurdle to any reform of the Railways - it has become too big to handle. According to the ToI report, it has become too centralised and hierarchical. Various departments work in silos and there is no work culture, says the report. The way out is to attract more talents from outside and also restructure the railways as business units. Increasing the efficiency is the key focus.
While the panel seems to have toned down its recommendations in its final report, there is enough room for the railway staff unions to protest against even in this form. The National Federation of Indian Railwaymen had earlier termed the panel's interim report a "disastrously confused perspective", saying Debroy failed to take into account how the successive governments have held back passenger fare hikes and starved the railways of much-needed investment.
Far from addressing this issue, the panel actually seems to be recommending a free hand for political bosses in deciding passenger fares. This goes against the true spirit of reforms and will only irk the unions further.
All in all, the panel recommendations seem to be setting the ball rolling on the much needed railway reforms, but if indeed the unions turn unfavourable then a five years could turn out too small a time to ring them in.


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