An international market research firm has suggested Indian Railways go for more market based approach, including phasing out of cross-subsidies between freight and passenger fares.
Japan-based Nomura Global Markets Research (NGMR), in its report, has been critical of inadequate investment in railways over the years which has resulted in severe capacity strains in the state-run transporter, affecting its services and making it uncompetitive.
The Ministry of Railways had commissioned Nomura to do a study on measures to re-invigorate the public transporter.
The research firm has observed that Railways is in “dire need of investments” and has given a thumbs up to Minister Suresh Prabhu’s approach in attracting investments.
“In our view, Railways’ multipronged strategy of plucking low-hanging fruit (prioritising and commissioning the vast backlog of projects, standardising and expediting project sanction to ensure robust project pipeline and facilitating time-bound execution, and accountability to enhance efficiency and focusing on bolstering its own finances, is potent enough for its reinvigoration,” the report said.
It has suggested that Indian Railways learn lessons and draw from experiences of other countries like United States, China and Japan to look for commercial or market based approach.
It has stressed that given the need to meet social objectives and in view of limited government resources in India, a mix of public and private funding models will likely be required.
“Political and social considerations have often dominated economic considerations, amplifying inefficiencies by cross- subsidising passenger services through higher freight rates.
“Over time, this has resulted in a vicious cycle of low investments and political interference, resulting in poor service quality and lower profits to plough back into investments. We believe to break this cycle, the government needs to step up investments in railway infrastructure,” says the Nomura report.
“We believe a much-needed paradigm shift in the investment and functioning of IR is underway, which bodes well for India’s economic growth,” the report said.