In 2019, a high-level committee headed by Bibek Debroy offered a set of solutions to address the huge resource gap faced by Indian Railways (IR). The solutions included an organisational restructuring of the unwieldy monolith to ease its slow decision-making process, and a shift to commercial accounting. It also proposed that an independent regulator be set up, to herald the pricing of services commensurate with costs. The panel fought shy of proposing “privatisation”, or even “deregulation”, but pitched for substantial “liberalisation”. The central theme that ran through the report is that mobilising resources from the private sector is necessary to supplement taxpayer monies, for the much-needed scaling up and modernisation of railway infrastructure. Seven years earlier, the Anil Kakodkar panel reviewed the IR’s safety features, and recommended several measures, entailing financial investments of `1 trillion over a five-year period. In 2015, another panel suggested a road map for asset monetisation, and restricting all fresh investment in rolling stocks to public-private partnerships (PPPs). In fact, an earlier Debroy panel had also suggested that private train operators be allowed.
Some of these recommendations have been acted upon. PPP models are being tried in various areas, even as bids called for the running of “private trains” came a cropper (the likes of Bombardier, Siemens, and Alstom showed some initial interest but quickly back-tracked). The unhealthy practice of cross-subsidising the passenger segment via artificially high freight rates is being reversed, albeit slowly. Passenger revenues were 43% of freight receipts in FY24, up from 40.5% in FY16, even though the number of passengers in FY24 were 6.84 billion, far lower than the FY19 peak of 8.44 billion. But the pace of the reforms has been slack, and their scale is below par. Political considerations and the entrenched bureaucracy of IR have kept weighing in.
Inevitably, loopholes in the railway safety system continues to get exposed with unacceptable frequency, the latest being the collision in West Bengal on June 17. The accident on a stretch where Kavach, the anti-collision device, is yet to be installed, killed 11 people. To be sure, the device that would trigger automatic braking is operational in only 1,500 km of the IR’s 68,000-km network, even three years after its roll-out. There aren’t enough vendors to manufacture and supply the necessary equipment, and IR isn’t in a position to crowd in the investors either. IR is overstaffed, and performs several un-remunerative operations, but it also keeps a huge vacancy of nearly 20,000 in safety-critical posts like loco crew/station masters.
For the record, the IR reported an operating ratio of 98.65% in FY24, implying it expends 98.65 paise to earn a rupee. If it hadn’t starved the various investment funds, it would have posted significant deficits all through the recent years. This explains the heavy, and rising, reliance on the Budget for railway capital expenditure (23% of the central government capex goes to the sector), IR’s heavy indebtedness, and the freeze on its fresh borrowings. While 46% of resources for financing of IR’s Plan Expenditure came from the FY15 Budget, over 96% of its capex of `2.62 trillion for FY25 were projected to be funded out of the Budget. The way out of this mess is well-defined. Sharper tariff optimisation, market development, efficient resource allocation, HR upgrade, and, above all, creation of profit centres (like the dedicated freight corridors) and the conditions for larger private investments.