Debroy committee bats for pvt entry in railway operations, independent regulator

The Bibek Debroy committee set up to suggest reform and restructuring of Indian Railways has recommended allowing private entry in both passenger and freight operations, setting up an independent regulator, separate policy making by the board from implementation and rationalization of railway zones.

“Private entry into running both freight and passenger trains in competition with Indian Railways should be allowed and private participation in various Railway infrastructure services and non-core activities like production and construction, should be encouraged by the ministry,” the seven member committee has said in its interim report.

It has said railways should be unbundled into two independent organizations – one responsible for track and infrastructure and another that will operate trains. Railways should focus on core activities to efficiently compete with the private sector. It will distance itself from non-core activities, such as running a police force, schools, hospitals and production and construction units.

The panel has suggested three ways in which a private company can get involved in the “competition for the market” – receiving a flat fee for management, without any responsibility for investment (service contract); conducting operation and maintenance with a limited responsibility for investment (O & M contract); and having complete responsibility for procuring and operating a train or constructing and operating a physical infrastructure (such as terminal or laying of tracks), and financing necessary investment at its own risk (concessions).

The committee has asked for amending the Indian Railways Act to allow the levy of tariffs by private operators without administered tariff-determination and fares being left to the market, with a qualification about passenger fares with guaranteed standard of services to a particular passenger class, such as ordinary sitting class and sleeper class.

It has said that suburban services should be separated and run as joint ventures with state and local governments, with tariff determination by state governments.  “It is imperative to split the roles of policy-making, regulation, and operations. There should be clear division of responsibility between the government and railway organizations. The Ministry will only be responsible for policy for the railway sector and Parliamentary accountability and will give autonomy to Indian Railways,” the panel has said in the 323-page interim report.  

It has said the ministry will determine the policy which should be based on ensuring what is in the best interests of the country and for the railway sector, and not based on what is the interest of Indian Railways alone. That policy should ensure competition in the railways sector and encourage private entry and private investments.

The Debroy panel has cautioned against leaving the implementation of its recommendations on the existing directorates of the Railway Board. “Otherwise, this report is bound to confront a fate similar to its predecessors. We would suggest that the implementation ownership of this Report should vest in the Minister of Railways alone, with an appropriate reporting mechanism to the PMO,” the report said. Debroy has also asked for implementing the recommendations as a “package” and not through a process of “pick and choose” the suggestions made are inter-linked.