Debroy committee report on Railways pushes for private sector participation

No privatisation but suggests independent regulator, private sector entry in sector, reorganisation of entire structure and financing

The Bibek Debroy committee on the proposed restructuring of Indian Railways (IR) has recommended  private sector participation in projects and setting up an independent regulator to promote competition in the segment.

The final report of the panel has not yet been given but is ready.

“It needs to be understood that this committee does not recommend privatisation of IR," the panel clarifies. "It does, however, endorse private entry, with the provision of an independent regulator,” officials said the committee had said in its final report.

The panel also said that if all its recommendations highlighted for the first five years -- creation of a independent regulator, reorganisation of the Railway Board, reorganisation of Group A railway services, revision of dividend policy and many others -- are implemented and issues related to social costs are addressed, the annual railway budget could be phased out. The Gross Budgetary Support (GBS) to IR could be mentioned as a paragraph in the Union Budget and no more.

One basic change between the interim and final report of the committee, officials said, is on the powers of rail general managers and divisional railway managers to choose the Railway Protection Force (RPF) and Railway Protection Special Force (RPSF). In both cases, the interim report had said this should be separated from the core function of IR, which is to run trains. However, in the final report, officials say the committee said the entire cost of the General Railway Police should be borne by the state government concerned. Else, GMs and DRMs should be given adequate freedom to choose between private security agencies and RPF for security on the trains.

Similarly, in the case of railway schools, the Committee suggested educational needs be met through subsidising their education in alternative schools, including Kendriya Vidyalayas and private schools, rather than hiring educationists on the rolls of IR.

For medical services, an official said the committee suggets GMs and DRMs and even other employees get the option of choosing either services offered through the Indian Railway Medical Services (IRMS) or privately empanelled practitioners.

“For preventive and curative health care of employees, the choice might be extended to the CGHS (Central Govt Health Scheme) framework and subsidised health care in private hospitals, which should not be restricted to referral services,” the official said.

The committee also recommended expanding the powers of station managers, also known as station superintendents, and not limiting these to commercial powers.

It also gave a firm timeframe to achieve the recommendations, which are divided into one span of five years and another of more than five years. In the first five years, it suggested major initiatives like reorganisation of the Railway Board, creation of an independent regulator, reorganisation of Group ‘A’ railway services, revision of dividend policy, etc.

For the next five years, it envisages a scenario where IR has six production units, each headed by a GM, all production units are placed under a government Special Purpose Vehicle (SPV), whose directors are chosen through the Public Enterprises Selection Board, coaches  and locomotives are produced in the private sector and the independent regulator resolves access to track issues for not only private train operators but also for IR zones, which compete with each other.

The panel said its recommendations had three pillars -- commercial accounting, changes in human resource (HR) policy and the independent regulator. The regulator will have quasi-judicial powers, with the functions of rate and safety regulation, fair access regulation, service standard regulation and licensing, and setting technical standards.

It also recommended bringing all the zonal construction organisations under the umbrella of one or more public sector units in the railways.

“The VII pay commission in 2016 would further push up the staff costs and pension costs, which will have serious financial implications on the railways. Thus, there is an urgent need to rationalise the manpower,” the committee has said. Also, to ensure IR appropriates more money to the Depreciation Reserve Fund, the committee has recommended a review of the dividend policy and provides it a GBS net of the dividend payment.

Officials said the Debroy panel has also called for separation of social objectives and their costs – Rs 25,000 crore annually -- for IR from commercial considerations. The committee also asked for adopting the Kakodkar committee’s recommendations to improve safety.

IR, it says, must also tap into extra-budgetary sources of funding such as multilateral funding agencies. And, change its investment strategy through ring-fenced investments in high-yield projects. Also, more remunerative activities like station development must be separated as SPVs involving the states.