Indian Railways: Some Thoughts for the new Minister
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1. Defining the Mission: The Mission of Railways should be to enable transportation of people and freight in chosen traffic segments in the most efficient and sustainable way. While the importance of ‘efficient’ is easily understood, the term ‘sustainable’ will require the Railways to operate on a commercial basis. Only then will it be able to generate sufficient resources to ensure that the services provided are continued in the future. This clarity will be essential given the woolly definitions practiced by the UPA with its minister, Mamata Banerjee once asking a question and answering it herself: “Should commercial viability be the only criterion to judge this need of connectivity? Or, should social responsibility be an important consideration? I prefer the latter” With this level of confusion it is clear that the imposition of socialism in an essentially commercial organisation is leading it to nowhere. No wonder Super Fast here could mean less than 50 kmph average speed. Accident rates continue to be high. Non renewal of assets leads to unacceptably high levels of ‘sweating’ them leading to fatigue. This is one of direct cause of accidents and delays (necessitated by slowing down due to weak systems).

2. Defining the Role: Given the size and economically complex nature of the country, the share of Railways in upper class long distance travel can be expected to diminish over the years. At the other end, other than in urban commute situations, share in short distance transportation too can be expected to diminish as it lacks the flexibility offered by road transport. In freight other than parcel, the higher flexibility offered by road has resulted the Railways already being an effective player only in bulk and long distance. Thus in the coming years, role of Railways will be to offer effective and efficient solutions in the field of transportation in the following traffic segments:

  • Passenger:
    • Medium Distance – all classes
    • Long Distance – lower classes
    • Urban Commute Networks
  • Freight
    • Long Distance
    • Bulk
    • Parcel services riding on passenger services

3. Lending Focus – Operations: Today Railways are treated as department with multiple functions performed and accounted for together. Operational function of the Railways needs to be kept separate from the other functions. Operations should exclusively concern itself with the Network, leaving out all ancillary services like Catering or Production. Operations should be guided by the considerations of: Service, Safety and Speed to its Consumers – both Passengers and Freight users. There should be no talk of privatising any of these as the private sector in India does not simply have the necessary wherewithal to manage this. On the other hand internally the System has built up enough competencies that with proper management can be raised to serve future needs. Within this, the three principal considerations of Service, Safety and Speed should require full and balanced attention in both the short and long term.

4. Production Arms: Production Units should be corporatized (not necessarily privatised) and spun off. They should be given a clean balance sheet, and Operations should deal with them on ‘arm’s length’ basis through long term purchase plans. In the first year firm orders should be placed to increase offtake. This could possibly be to the full extent of available capacity in a one year time frame. For the next five years, orders need to be farmed out based on capacities, price, and financing. These could be suitably broken up into firm orders and options. With a clean balance sheet and definite order book, these organisations should be able to access finance from the markets – equity as well as debt. Energies need not be wasted by trying to privatise these organisations. Internal Management through deputation, delegation of powers and encouragement to develop human resources in the long run should ensure effective management. Where required technology upgradation can be effected from other global majors through joint ventures with global majors. Essentially once spun off and provided autonomy with the appropriate control systems, there should be no further budgetary support for these arms. In fact if handled well it could be even possible to fund capital expenditure for procurement entirely outside of budget. Politically it should be possible to push through this restructuring as long as the interests of the current labor force are adequately protected. One way to manage this could be to treat the current work force in Railway’s rolls and depute their services over say five years. In meantime the organisations can develop their own structures.

5. Service Arms: Service arms like IRCTC and some others like Concor are already corporatized. This should be carried to its logical conclusion. The organisations should get autonomy and Operations should deal with them at arms length through Service Level Agreements. IRCTC should be further broken into Ticketing Services Organisation and a residual one dealing with Catering Services. Technology requirements / upgrades for the former can be intensified with the resultant focus. Again here too there should no further budgetary support. As in the case of Production units, to make it politically palatable, employee interests can be covered by a system of deputation for a limited period.

6. Urban Commute Networks: These have a different set of issues when compared to the rest of the network. Effectiveness as well as Commercial Viability requires close alignment with the States’ as well as Local Bodies’ plans. A totally different approach will be necessary than what is currently being followed. In some cases, spinning them off into separate organisations under a State Government’s control may need to be examined. Issues concerning these should be actually treated as pertaining to Urban Development rather than that of a standard Railway Network. Some of the initiatives will need to be integrated with local public transport systems. For example providing high speed short distance / commuting network around Delhi can help decongest Delhi as well have the potential for systematic urban development of places in Western UP, Haryana.

7. Step up Investment on Network: With the sole attention of core organisation on the Network, this has to be strengthened as a mission. The following can be set as priorities:

  • Dedicated Freight Corridor
  • Capacity Augmentation on all High Density Routes – additional lines, selective electrification, de-bottlenecking
  • Track Maintenance and Renewal
  • Completion of all projects on hand with IRR of say 15% and above within one year – disproportionate allocation of funds for these, while putting on hold for two – three years all the political, low viability projects

8. Management Culture: Once it is appreciated that the Railways needs a Management Culture rather than a Departmental one, many other small but still significant pieces will fall in place. For instance Railway Budget need not be presented separately. Share of Railways in the Total Budget is after all no longer what it was in the past! The sight of a minister reading out a long winded speech full of platitudes while everyone else is reading it in the same hall is so archaic today! If this is still required for political reasons, at least the culture of reading out trains and stoppages in a parliament speech should stop. The Minister should cover the broad points and leave all Operational and Project details to the Railway Board and the regional networks to announce / deal with.