The Planning Commission has asked Indian Railways to hive off its production units and outsource non-core activities like catering and ticketing to trim the size of the establishment to bring in higher efficiency in its primary function of running trains.
The commission, headed by Prime Minister Manmohan Singh, has also urged the national transporter to stop cross-subsidising passenger services by freight earnings.
The commission has suggested increasing passenger fares and setting up an independent tariff regulator like the Telecom Regulatory Authority of India.
The commission wants these suggestions to be implemented with the larger objective of separating the railways? functions of making policies and running trains.
Indian Railways is a behemoth with presence in diverse fields like production of locomotives, drinking water, catering, ticketing, managing schools and hospitals, besides operating trains. It has a workforce of more than 14 lakh, on which it spends almost half of its annual budget.
?Railways have become a liability on the government. They want money but no accountability. They are averse to simple reforms like increasing passenger fares,? a senior Planning Commission official who handles infrastructure issues told FE.
A senior railway official said, ?Some key reforms are in place, like the opening up of container trains movement. We are also looking at public-private partnerships in station development and manufacturing of rolling stock.?
The Planning Commission has asked the Railways to draw a roadmap to implement the suggestions during the 12th Five-Year Plan, which begins on April 1, 2012.
The Commission has formed a working group headed by railway board chairman Vivek Sahai for this purpose. The group will submit its report by August 31. The report will later be considered by a steering committee of the Planning Commission for inclusion in the 12th Plan document.
A committee headed by Reserve Bank of India?s former deputy governor Rakesh Mohan had recommended similar measures in 2001. Since then, the finance ministry and the Planning Commission have been trying to convince the railways to set right their finances.
Some of these measures were also part of 11th Five-Year Plan of the government, but the railways have succeeded in maintaining the status quo.
Passenger fares are where they were eight years ago, but freight rates were raised six times in 2010-11 itself. Due to this differential treatment, the fare-freight ratio of Indian Railways is a minimal 0.3 against 1.2 in China and 1.4 in South Korea.
Struggling to make ends meet, the Railways had also demanded doubling of gross budgetary support from the government to R39,600 crore in 2011-12 against a year ago.
Also, it just about managed to register an improved operating ratio in 2010-11 at 92.1% against 92.3% a year ago through a cut in depreciation reserve fund and a lower dividend to the government.