Repairing rather than reinventing Railways is the need of the hour

Aarti Khosla

While scarce resources were sunk in unremunerative projects, the budgetary support was reduced and the share of the Indian Railways (IR) in the Plan outlay was drastically cut. Added to this was rising staff and fuel costs. The situation has come to such a pass that for earning every rupee, IR is spending 99p. Where is the money left, then, for investment on replacements, renewals, modernisation and capacity expansion. It did not require an expert group to identify this problem. What, then, is the remedy?

Raise resources, cut down costs. That is, however, possible if IR is given the freedom to raise or reduce fare and freight depending on the pull of market forces. The Rakesh Mohan Committee thinks that it can be possible only when IR is converted into a corporation as there will be greater freedom in pricing and government control will be minimised. This is a fallacious argument. Are the corporations free from government control or political interference? Even the Navaratna companies are not free from such control.

The expert group need not have to look around the world to know that. Even the global experience they are referring to has not been updated by developments after privatisation. Take the case of Rail Track in the United Kingdom which has been an utter disaster after privatisation so much so that the first step towards renationalisation was taken by the UK government on October 7 this year when they placed Rail Track under the control of government-appointed administrators by obtaining an order from British High Court. The company was so badly run that it failed in its basic job of moving passengers from A to B. Delays and accidents became frequent because Rail Track kept profits before safety. It was an eye-opening major corporate collapse. The fact that the privatised company had to go to Government with begging bowl for subsidy to pay dividend to its shareholders clearly and abundantly proved that it made no commercial sense to privatise British Rail. It is, therefore, ironical that the expert group is proposing for IR from the experience of UK, among others.

As for the World Bank formula on corporatisation/privatisation by which the expert group is obviously much influenced, one has only to quote Joseph Stiglitz, one time economist of the World Bank and now a Nobel Prize winner in economics. In an interview to The Observer of London (October 10) he stated that the World Bank prescribed exactly the same four-point programme, of which ‘Briberization’ is one. The criticism may sound too harsh but is certainly not without basis.

Thus the solution to IR ills, as suggested by the expert group, is a borrowed one and stands largely discarded because of the bitter experience with privatisation in this sector. It seems it could not think of any solution relevant to socio-economic realities of India and has gone by what has already been handed out or adopted for sectors like telecom sector. The expert group accepts that the arrangements put in place in the telecom sector in India is also “in some process of flux”’. Then why recommend such an arrangement for the Railways?

Another thought that has gone into this recommendation is the inability of the central exchequer to meet with the requirement of funds for IR in view of its own none-too-happy fiscal condition. The expert group assumes that after conversion into a corporation, IR would be able to raise resources from the public. Is this not too facile an assumption, if not altogether unrealistic? Railway business can never be that profitable so as to attract investors with large portfolios for investment. The amount of money required for what the group calls ‘strategic high growth scenario’ cannot come by from external sources. Borrowing from external sources would mean placing a heavy debt burden on the system.

The theme goes on like this: “Central exchequer cannot help the Railways because of its own bad fiscal condition but it should help the IR in the initial years of its ‘re-invention’ as a corporate body.” As if the IR re-christened into Indian Railways Corporation with the Railway Board revamped as the Indian Railway Executive Board and a Rail Regulatory Authority in place will work as Aladdin’s lamp to pave the way to a cave full of gold!

The institutional separation of roles mechanism is flawed in its very nature. The expert group itself is doubtful of the credibility of the model suggested by them. That is why they themselves reject the compulsions that drove Europe to privatisation as not being applicable to this country. In the face of doubts, contradictions and uncertainties expressed in the report, are the ‘conservatives’ not genuinely alarmed that the Railways are simply too important to be experimented with? Billions of passengers, 1.5 million employees and 40 per cent of the nation’s freight cannot be made guinea pigs.

What the Indian Railways, therefore, require is ‘repairing’ rather than ‘reinventing’. While IR may have no control over staff costs, some areas can still be identified for pruning the expenditure on establishment. For example, why have so many recruitment boards when one Railway Staff Commission on the pattern of Staff Selection Commission would suffice. In the light of modernisation and computerisation, a large number of posts must have become redundant. Some of the non-core activities like sanitation, catering, Yatri Niwases etc. can be privatised.

The expert group has included in the list identified by them of non-core activities, railway hospitals, research and production units and security too. But if railway employees do not have their hospitals, where do they go for medical facilities? The pressure on the inadequate medical infrastructure in the country will further go up. Similarly, security is one item which cannot be shunted out in the present day world of terrorism. After September 11, many of the world’s airlines had to greatly tighten their security. Other modes of transport are also attractive targets for terrorists. As we are aware, trains in India have already been targets of many blasts. In such a scenario of insecurity how can the Indian Railways spin off their security concerns to private players? As regards production units, these can be corporatised but then the IR remain the sole buyers of rolling stock from these units with its own attendant problems in such an arrangement.

Indian Railways are passing through a bad phase. Rationalising fares and freight; scrapping unviable projects; support of funds for accelerated completion of remunerative projects and catching up with renewal and replacement work would nurse IR back to health.
Also, a new vision is required—not the one recommended by the expert group. In the post-September 11 world, airline travel has become highly unsafe, inconvenient and costlier. Here is an opportunity for IR to capture upper class travellers by providing faster, comfortable and safe travel. Look at AMTRAK of the US, post-September 11. A new challenge has been thrown upon it and it is carrying more passengers than it ever could think of. The future of IR lies in passenger traffic and that too the long-distance one. It is high time a roadmap for meeting this requirement is drawn up. It is in this area that corporatising Indian Railways, so vital to the unity and integrity of the nation, is somewhat like suggesting corporatising the defence forces of the country because running the IR network requires similar discipline and commitment.

Concluded

(The writer is former Executive Director, Finance, Railway Board)