Railways – Privatisation of Indian Railways, a recommendation

The much-awaited Bibek Debroy committee report on the restructuring of Indian Railways lays down a five-year roadmap to evolve a statutory rail regulator, scrap the Rail Budget and make room for more players in an “open access” regime which turns the Railways into just another train-service provider in the country.

Instead of an aggressive approach as was seen in the interim report submitted in March for comments, the final report, to be presented to Railway Ministry on Friday, calls for more gradual changes.

The report, accessed by The Indian Express, makes the existence of an independent, quasi-judicial Railway Regulatory Authority of India a prerequisite in five years for reforms like un-bundling and restructuring of Railways.The Rail Budget as we know it, should cease to exist after that, it says.

“Once the changes of the first five years are implemented, including the resolution of the social costs issue, the Railway Budget should be phased out,” the report says adding that the government should take the entire burden of social cost borne by Railways by way of subsidy.

Pushed by Prime Minister Narendra Modi, the high-level committee was formed in September to restructure the Railways and suggest ways for resource mobilisation. After the receipt of the final report, the Railway Board is to submit a report on it to the PM by June-end.

Other seven members of the panel include former Cabinet Secretary K M Chandrasekhar; former MD National Stock Exchange Ravi Narain; former CMD Proctor and Gamble Gurcharan Das; former Financial Commissioner, Railways, R Kashyap; Senior fellow at Centre for Policy research Partha Mukhopadhyay.

The report envisages the creation of a Railway Ministry eventually with at least three Secretary-level officers (“not attached with the Railway Board”) to lay down policy for the rail sector, not just of Railways alone that “should ensure competition.encourage private entry and private investments.”

The Regulator will work under the policy framed by the Ministry, while the present Railway Board will become a board of Indian Railways – the government-run operator – alone. The Board itself might be pruned to having only five secretary-level officers from the present seven. It will be up to the Regulator to decide technical standards, set freight rates and resolve disputes. The Regulator can recommend fare revisions but these will not be binding on the Railway Ministry, it says, leaving scope, presumably, for the political dispensation of the day to take a call.

The first five years will see preparatory work: migration to a commercial accounting system (to figure out the social cost burden) in two years; uniform induction system of all new Human Resource; and devolution of powers to General Managers, Divisional Railway Managers and Station Managers.

In the new report, the committee has left the job of figuring out how to do that to

the Minister of Railways under supervision of the PMO and aided by a dedicated group of officers. There is room for allowing outside experts to help in this too.

Separation of railway track construction, train operations, and rolling-stock production units under different entities to enable open access can happen only after after that, it says. The Dedicated Freight Corridor Corporation Limited (DFCCL), the report recommends, should be made autonomous and separated from Indian Railways so that it gives non-discriminatory access to both Indian Railways and private operators. Operators should be able to pay directly to DFCCL without having to interact with Railways.

As the tone of the interim report on the subject of private entry was criticised by unions and the bureaucracy, the final report is more cautious. “It needs to be understood that this Committee does not recommend privatization of Indian Railways,” it says, adding, “It does, however endorse private entry. with the proviso of an independent regulator. This Committee prefers use of the word liberalization and not privatization or deregulation, as both the latter are apt to misinterpretation.”

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