Rail tariff authority: Here’s how to put Indian Railways rates on track

Updated: October 7, 2016 7:24 AM

What the ministry needs is an advisory body not a regulatory authority

Indian RailwaysThe idea to establish an Indian Railways Regulatory Authority (IRRA) was first mooted in the Rakesh Mohan Committee Report (2001), which had other innovative recommendations as well. (Source: PTI)

The proposed rail tariff authority or an independent regulator for the Railways is a complex institutional phenomenon; the more it is worked out, the greater is the complication and confusion involved in it. One is sure to be lost in its incompatibility and impracticality of thought-process and action.

The idea to establish an Indian Railways Regulatory Authority (IRRA) was first mooted in the Rakesh Mohan Committee Report (2001), which had other innovative recommendations as well. But it was not taken up seriously because the committee stood for corporatisation of the Railways and almost proposed to dismantle the ministry and the Railway Board. Not knowing about the consequences, the idea was reopened by Dinesh Trivedi (in 2012), though the Railways’ professionals did not consider it a viable option. Later on, other ministers—Pawan Kumar Bansal and Mallikarjun Kharge—under the pressure of the then Planning Commission, took up the cause for establishing a Rail Tariff Authority (RTA). Though Bansal had to leave the Railways, Kharge ultimately succeeded in getting the RTA proposal passed by the Cabinet.

The NITI Aayog made the case for an independent regulatory authority which would, in more stringent ways, control the ministry—not only its tariff activities, but also technical and standard-setting aspects that should have no relevance to any outside agency, other than railways’ own professionals, the engineers and technicians. However, the Bibek Debroy committee considers the regulatory authority to be a super-structured body which can appoint and remove the members of Railway Board. It will have its sway over the research, design and standard organisation (RDSO) and will bifurcate its activities to the time when they were two separate units, in the pre-1957 era.

The Railway Regulatory Authority of India (RRAI), as proposed by Bibek Debroy, has its own variants like the RTA and IRRA that were proposed by the Rakesh Mohan Committee or even simply a tariff structuring body as proposed by the Railways’ own committee. All these bodies, though, have the same aim—to suggest tariff proposals—but their approach is different. The Rakesh Mohan Committee talked of introducing a plethora of organisational bodies as IREB, IRRA, IRC, etc, which would displace not only the ministry but the minister as well. The Debroy Committee, on the other hand, has a cautious approach. It parries the question of de-nationalisation of Railways, but emphasises that the liberalisation process is already an accepted theme of the Railways, so they need to adopt measures of reforms and restructuring.

But, an independent regulator, in the form of RRAI, has its own complications. It is proposed to become more than a tariff regulatory body and The Railways Act 1989 doesn’t allow any outside agency to have the power of fixing rates as the ministry is the only competent authority to do so. If the independent regulator is so important, the Railways Act would have to be amended, rather transformed, which is again a difficult task as various clauses that govern the Railways’ financial matters are spread all over it. Even if this stupendous task is achieved through a rigorous process, its working would directly clash with the ministry and the minister. To avoid this, it has been proposed that the regulatory body must have finer teeth to suppress the ministry and RRAI should be set up statutorily, possessing quasi-judicial powers, quite distanced from those of the railway ministry.

It is here that the complications arise. Statutorily, it is the minister who wields the power and is answerable to Parliament. No outside agency can play that role. The proposed RRAI seems to be an authority over an authority. What type of power structure does it envisage?

The other fact is that such regulators are used only when the players are different. Here, the players are the same. The railway ministry and RRAI would belong to the same genus and statutorily would not be different. So, the control of one over another would be mismatched, misjudged and incompatible. The idea of RRAI seems to be unrealistic because of the duplication of authority and other related factors. Perhaps, the idea of a regulatory body is a concept borrowed from Trai, but one must remember that in the department of telecommunication, the players are different.

The tariff authority in that sector is feasible only because the sector is a multi-operator service sector, unlike the Railways which is a single operator service sector. In case of the Railways, it is the minister or the railway ministry that is being proposed to be regulated by RRAI, and this is an anomaly, rather an unpleasant situation. This fact has been established by the experienced financial cadre of Indian Railways and academics engaged in research at various centres like the Institute of Rail Transport, Delhi, and Railways Staff College, Vadodara.

What could be done instead is to establish a tariff authority through the executive process, as an advisory body, so that the ministry would follow its advice. It would have two benefits: first, it would not create any antagonistic scenario and the Railways professionals would accept it easily; and second, there would be no need to amend the Railways Act.

The tariff mechanism of the Railways is a complex matter. It has to facilitate the system of services for demand as well as supply. At times, it has to create its own demand because transportation services are neither storable nor transferable. In this regard, so many pricing patterns have been formulated from basics to dynamic, from flexi- to surge-pricing. And still nothing is final. How will an outside agency—a regulatory body—unaccustomed to the Railways’ homogenous pattern, work out the whole system? There are dangers of its failure and unacceptability. The Railways has already shrank in size and authority by withdrawing from presenting a separate budget.

–By R N Misra

The author is a retired professor and commentator on the railways.

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