Enabling or disabling the railways?

Bibek Debroy Committee Report

What the government gives the railways by left hand, it takes away by right hand. Ignoring huge subsidies that the railways bears, the committee calls for its break-up, on the pretext that it is a big monolith, as if it is a constraint. Privatisation of its operations as well as leaving tariffs to market forces as in the case of power sector is nothing but privatisation of profits and nationalisation of losses

The High Level Railway Restructuring Committee instituted under the Chairmanship of Bibek Debroy seems to give a virtually contradictory report for development of the rail network. The around 300 pages of the report attempt to scan the present-day affairs of the Indian Railways. Before we get into the report and its implications, let’s have a glimpse of the situation.

The Indian Railways is a great integrating factor with around 65,000 km routes. It has proved to be biggest public transporter and the cheapest mode for the poor and the rich alike. Everyone agrees that it is bound by constraints. From a funding of 70% in the first Five Year Plan, it has stepped down to just 20% today. Largely the Indian Railways has been left to fend for itself. It bears an annual subsidy to the tune of Rs 25,000 crore by way of social obligations – concessions to students, senior citizens, women, a few categories of patients, differently abled people, freedom fighters and several national award winners etc..

The role of the Indian Railways during calamities is really overwhelming. Apart from this, the Railways pays to the government some Rs 9,000 crore as dividend, which no other institution like National Highways, Ministry of Shipping, Airport Authority of India does. In these areas, support is extended from the General Budget, too. That what the government gives by left hand to the Railways is taken away by the right hand is exemplified by the Debroy report. This leaves very little money for the Depreciation Reserves Fund affecting renewal of old assets. The railway is forced to borrow from market for assets renewals.

Trains are run on economically unremunerative routes for the social cause. Now places like Agartala and Kashmir are being connected by rail, which are cost-ineffective but yield rich dividends in terms of integration and economics for the nation. The report speaks of misguided political interventions in the past which have cost the Railways dearly. A point in contrast is that crores of rupees are spent on building a vast roadway network across the nation. All these constraints have prevented the real expansion of the Railways and indicate the extent of neglect this sector has had to face.

The Committee suggested various reforms in the Indian Railways administration set-up such as decentralisation of operational decision-making powers to General Managers and Divisional Railway Managers for quicker implementation and prioritisation of projects and assets uitlisation, passenger amenities and safety. It suggested reorganisation of the Railway official hierarchy by amalgamation of several cadres, curbing the departmentalization of mindsets, granting some leverage to efficient zones, which are really welcome.

While doing so, the report goes to the extreme to suggest total break-up of the railway system. This is really funny and contradictory. It suggests splitting of the Railways vertically and horizontally. Separation of policy-making, regulations, operations , infrastructure and manufacture is envisaged. It describes railways as a big monolith structure which ought to be broken immediately – as if that is a constraint for progress. The Indian Railways is a proud system which manufactures its own locos, coaches and wheels, and maintains them. These have been built up historically for a long period. This, the Debroy report seeks to demolish.

Let’s look at how the report seeks of the government to do all this. A separate infrastructure company of maintenance works to be formed as a SPV of government initially and later to be listed. A separate Indian Railway Manufacturing Company is to be formed with all the production units like coach factories, diesel loco factories, electric loco factories and wheel factories. Already, the FDI is being green-lighted for these activities. However, the report seems to ignore the simple fact that we save Rs 20,000 crore of foreign exchange annually in lieu of the manufacture of the rolling stock.

The report next calls for an open access to the infrastructure for any new private operator for running the trains. The committee states that despite ensuring all this, private companies still won’t come into the railway system. The private sector would come only if adequate profits are guaranteed. For this, the Committee underlines “ the need for an independent umpire. The private sector will come only if there is fair and open access to infrastructure. Hence shift regulatory from the government to an independent regulator.”

Thus it wants to create a Railway Regulatory Authority of India (RRAI) to decide the tariffs. It wants fares to be decided by the market. The Electricity Regulatory Authority is a case in point. Prices of power are determined as discoms hike their cost of power and the transmission company throws the burden of power on the consumers periodically in the name of surcharges etc., A regulator in the railway sector will also follow the same and the fares are bound to increase by 4-5 times, as private companies would seek super profits and nothing else.

The committee talks of separating suburban services and engaging state governments or other parties to be involved as joint ventures and the tariff structure be reviewed accordingly which will ultimately hit the urban passengers. What happens if public utilities are linked to market is visible everywhere. The private operators will run trains only on profitable routes, pushing the Indian Railways to operate in unviable routes. This is nothing but privatisation of profits and nationalisation of losses.

All over the world, the experiences of vertical or horizontal disintegration of the railway system, due to Thatcherite policies and World Bank modalities, have given unfavourable results. The railways have faced coordination problems, access issues, deterioration of safety, cost rises, and the situation of companies ending up bankrupt and compensated by taxpayers money, and what not. There is a demand from the Britain public for takeover of the railways by the government.

No less than Tony Blair, the former Prime Minister of UK, had commented that, “if there is a hell in Great Britain, it is the (private) Rail network!”

The example of Mumbai Metro is clear. It is a joint venture between Maharashtra government and a Mukesh Ambani company. It was agreed between the this company and the Maharashtra government that the fares should be Rs 9, 11, 13, 15. But, on the very introduction of the metro, the fares were unilaterally fixed by the Ambani management as Rs 10, 20, 30, 40 ! The then Chief Minister Shivraj Chawan was furious. Add to it, Reliance abandoned the metro linking Delhi airport to the city and which was later taken over by the DMRTC, the Sreedharan-headed PSU.

One thing seems to be clear. The corporate sector would not like to take over the whole Indian Railway and so the mantra is to break it into several pieces and hand them over to them on a platter. The Bibek Debroy committee is therefore an exercise in futility and more of a fantasy .The Indian people are not ready to accept a costly railway system. (The writer is a social analyst and can be reached at [email protected])

By Shivsagar