Economic reform is often described as constructive destruction. This is precisely what the NaMo administration seems to have done with the Indian Railways by merging its budget with the Union Budget.
The decision of the union cabinet to bid adieu to the 92 year-old practice of separate general and rail budgets by unifying them adds credence to the government’s commitment to reforms. The move has generated much public debate with political rivals trying to raise the bogey of privatization and the “hidden agenda” of the government. However, a new reality has emerged – that of the national transporter being able to shed its decade-old image of a loss-making government department.
The merger of the railways budget with the Union budget has opened up the possibility of the Railways basing their projects on commercial feasibility and not sheer populism or political considerations of the Railway Minister of the time.
“It’s a forward-looking move and a major reform strategy perhaps unthinkable by any other regime who wanted to play populist. The NaMo administration has taken the reforms to the second stage in true sense of the term,” said a senior Railway official.
In the words of Suresh Prabhu, the move is “historic and will help raise capital expenditures.” Not long ago, Shiv Gopal Mishra, Railway Federation Workers’ Union leader, had said that the manner in which Indian Railways finance was being managed, the locomotive giant would be soon going the Indian Airlines way.
“It was sheer populism of leaders like Lalu Prasad and later Mamata Banerjee that for years there was no increase in railway fare. While leaders got political mileage, the railways suffered,” BJP leader Arjun Meghawal had said in Lok Sabha once.
But now that sickly journey has been stalled and new expectations, according to officials, include “separation” of the suburban services and run them as joint ventures with state and or local governments.
The joint venture body, according to Bibek Debroy panel, should also be given the power to determine tariffs independent of the government’s decisions per se.
Another insider said, there could be “split” on the roles of policy-making, regulation, and operations. Thus, the Railway Ministry will only be responsible for policy for the Railway sector and Parliamentary accountability. This will ensure less of red tapism or bureaucratic and ministerial interference from the Railway ministry and at the same time ensure running of the railways as a commercial enterprise.
The government may also soon set up an authority – Railway Regulatory Authority of India (RRAI) with an independent budget.
The RRAI may be given the powers and objectives of economic regulation, including, wherever necessary, tariff regulation; safety regulation; fair access regulation and including access to railway infrastructure for private operators.
At some point, Indian Railways Act may be amended to allow the levy of tariffs by private operators without administered tariff-determination. “The Indian Railways needs to adopt a commercial accrual-based double entry accounting system to determine the precise extent of subsidization,” an official said.
A few drastic measures are said to be on cards to streamline the present systems of recruitment into Indian Railways through various channels. The present eight organized Group ‘A’ services in Indian Railways can be broadly categorized in two bigger groupings – the technical and non-technical services.
Finally, the railways may focus only on its core activities to efficiently compete with private sector road transporters. In the process, they distance itself from non-core activities, such as running a police force, schools, hospitals and production and construction units.