Record Cafe: Commercial principles and social service must be cleanly separated in the railways, says Bibek Debroy

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Updated: November 4, 2014 3:53:55 PM

The committee set up by the government to reform the railways is travelling across the country this month, before it sits down to give a final shape to its draft report that will be submitted within six months for wide-ranging deliberations. Chairman of the panel Bibek Debroy explains the setting and the possible solutions to rejuvenate the railways to Santosh Tiwari and says that the rail regulator can wait till its ailing systems are fixed.

What is the need for another committee on the railways when several panels in the past have given their recommendations?

The problem with the previous committees has been that they suggested where to go but didn’t suggest how to reach there. Our idea is to not only suggest that there is a need to go from point A to point B, but also to provide the process, the way, to reach point B.

The major gaps, according to you, are in which areas?

Take the case of accounting, there is a need to clean up the process so that one knows what is going on. Or take the case of railway cadre. There are multiple cadres and multiple entry requirements. I am just giving you two examples. The major thrust of earlier reports has been that corporatise the railways and everything will be solved. Our approach will be first you need to solve the issues. It is only after you solve these that you will be able to figure out a means to corporatise.

Alternatively, what is the point of setting up a rail tariff authority if I don’t clearly know what the profits are. I don’t get the true sense of the cost. If we say you set up a rail tariff authority, and this is my personal view because we have to deliberate it in the committee, unless I do these things how can I deal with it. Do I know how much the social cost obligation actually is, according to commercial principles? Do I actually know how much of a loss sub-urban rail operation makes? These are some of the examples where we will be indicating the processes to fix the issues before talking of corporatisation.

Everybody says privatise the railways, but what does privatisation mean? If I can’t ensure timely arrival of trains, whether it is passenger or freight, between say Delhi and Mumbai, and if I throw the sector open to the private sector, will the private sector come and participate in it? If there is an accident, who takes responsibility for that? Alternatively, I may argue that let’s take a situation where railways are running a train but you (a private individual) can have a separate passenger coach—that is privatisation. Then there is a perception that the railways are sitting on a lot of surplus land and they should utilise the land to develop the stations, make them modern, construct malls, etc. Many people don’t know that the land which is there is not in the metro stations such as Delhi where the municipal corporation has not given permission for such things as it requires more facilities such as parking, etc. The similar is the case in Mumbai. This is happening where these problems are less. It is happening in Bhopal, in Surat, and in Chandigarh. I am not defending the railways. There is a lot of inefficiency. There is a lack of concern for the customer, for the passenger and on the freight side, but in resolving this you have to go through different steps.

You also have to understand that there is cross-subsidisation of passenger side with freight…

That I didn’t mention because that is taken as axiomatic. Passengers will be willing to pay higher fares provided there is visible improvement in services. It is possible to deliver passenger amenities on trains such as Shatabdi and Rajdhani. But there are a large number of trains which are not of that variety. The bulk of railway passenger traffic, over 90%, is unreserved.
There is certainly a need to increase the share of the railways in the transport sector. So you have to come out with a road-map for a decade or so. Isn’t it?

That is why I am saying you have to look at different segments within the passenger and the freight parts. It is not a homogeneous category.
So you are suggesting different price rationalisation for different segments in passenger and freight both…
Precisely. It is easier to do it on the trains side, it is difficult to do it on the stations.

The station part can be managed by the private players. Isn’t it?

Correct. But these can be done in 20 or 40 stations. It will not work in all the 7,000 stations. There is not enough traffic.

Coming back to the railway regulator, you want it to come into play after the processes have been fixed?

I think multiplicity of authorities suggested by different committees doesn’t serve any purpose. If at all we need a rail regulator, it has to be independent, its recommendations have to be binding, and we have to find good regulators who are independent of the government. In principle, yes we need a regulator.

You need a regulator or an authority which fixes fares without the government intervention. Given the past experience, is it possible to get a regulator who is independent of the government?

That goes back to separating the railways’ functioning according to the commercial principles and the social service obligation. The two need to be cleanly separated. Because until these two functions are cleanly separated, both from the costing point of view and the conceptual point of view, we will go round and round in circle. Once one has figured out how to cleanly disentangle these two, then one can figure out that this is the role of the railway board, this is the role of the ministry, and this is the role of the regulator.

This was targeted in the power sector. And it was said that if the states want to give subsidies, they should give it through the budget. Will it work for the railways?

Electricity is one thing but the states would be very reluctant to do it in something like sub-urban railways. If the railways are doing it without any support, then we are again going into the muddy waters of commercial operation and social obligation.

At some point of time, you have to then look at better targeting of subsidies through Aadhaar or any other mode. Isn’t it?

That’s correct. The only catch is that more than 90% of the passengers belong to the unreserved category. How do you do it for them as there are no details. I am still grappling with it. This is something I have been thinking about. I will now look at what are the problems associated with it. That doesn’t mean you don’t do it. But you need to handle the problems.

Should the railway budget be kept separate from the general budget or should the finance part be merged with the general budget going ahead?
If one is moving towards the goal of the eventual call on corporatisation of the railways, cleaning up the relationship between the railways and the government, then you don’t need a railway budget. It is not unification, you don’t need the railway budget any more. Unification comes into the picture only if you are not separating railways completely from the government. If you are separating it then this is a non-issue.

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