Rajesh V Shah: Re-laying the railways

The Indian Railways is the mother of all infrastructure and, as we saw demonstrated so tragically last month, has become the sacrificial lamb at the altar of coalition politics. This is in spite of the fact that films from Devdas to Pather Panchali have captured the romance of rail travel and established its iconic status in the national consciousness; and that it carries more people and goods each year than any other railway system in the world, except for China’s.

In the 1950s, the Chinese railway system was a fraction of the Indian system. Since then, it has made massive investments in track and rolling stock, boasts of trains that run at over 300 km per hour, a high-altitude train line to Lhasa from the Chinese heartland, and a trial magnetic-levitation train line that may herald the future of railways the world over. In comparison, Indian Railways is approaching terminal illness, having made minimal investments in expansion, technology upgradation and safety assurance. It is severely strapped for funds, and as a consequence faces continual loss of freight to road transport — which is more costly and environmentally unfriendly. Passenger services are plagued by overcrowding and unsanitary conditions. Strong medicine must now be administered to the system.

Why are the railways run as a government department? The economic rationale is that it is a natural monopoly, and if placed in private hands, would lead to exploitation of users. However, the economic logic applies only to the components of right of way, railway lines, signalling, terminals and stations. Another argument is that the railway system is critical for national defence, management of natural disasters, and movement of critical supplies such as foodgrain and politically significant sections of people who travel on concessional terms. These important functions, it is argued, require departmental ownership and control, in which resource generation is not the primary concern.

While acknowledging some of these arguments for now, neither the railways nor the government are in a position to provide the humungous funds required if the railways is to expand, modernise, secure safety and fulfil its role as the engine of our national growth.

To start with, major components of the railway system in large, discrete packages — other than those which confer natural monopoly — can be offered for private participation, consistent with leaving the rest of the system in government hands. While some reserved slots may be held for priority operations, time slots for competitive lease to private or PPP operators of goods and passenger trains can be bid out to private operators. To enhance investments and availability of rolling stock, it may be allowed to be owned by individual operators and transported by departmentally-run trains on regulated tariffs. Inviting global leaders with established standards of experience, safety and efficiency in railway transportation to bid for such operations could also be considered.

High-speed passenger trains must be part of building a modern national infrastructure. This can be done with technology, management experience and funds from railway corporations from countries such as France, Germany and Japan, till we build our own capabilities. Indian Railways can provide the right of way, and allow such lines to be set up between major urban centres on the build-own-operate-transfer model, which has been well-established in other areas of infrastructure.

Railway locomotives and rolling stock factories can be corporatised, with private — including foreign — ownership to increase competition and provide much-needed technological up-gradation.

Maintenance, catering, and janitorial services may be totally competitively outsourced, with benefits in terms of cost and quality to the railways and its users. The large number of railway hospitals could similarly be converted to a PPP mode and made accessible to the public on payment, while retaining the benefit of free treatment to railway staff.

The railways own vast amounts of land — along the railway lines, stations and railway colonies. While a significant part of the land would be required for future expansion of railway services, in principle, much of the remainder could be used for commercial purposes. The Indian Railways is clearly the largest engineering and transport organisation in the country. In theory, the Railways can also be owners of the country’s largest hotel chain, the largest realty development corporation and the largest retailer. The vast communication network of the railways can be substantially enhanced in participation with BSNL or MTNL to create the largest telecommunication company in the country. For all these it is it is quite possible to evolve transparent bidding processes accepted by key national institutions to remove accusations of sweetheart deals.

The NDA government, while introducing private participation in identified PSUs, developed a robust model of VRS payments and absorption of employees of government organisations. This model can be applied wherever private participation is introduced in this new programme of the railways.

In this transformation, the rail ministry and Railway Board would retain the responsibility for planning, management of the natural monopoly components for tariff regulation — through an independent regulator — and setting and enforcing standards of service and safety. They would also be responsible for ensuring that the Railways fulfill their role in war and natural disasters.

The Indian Railways have a superb cadre of professional personnel who have the capacity to deliver a major transformation, which will enhance the lives of hundreds of millions of more Indians than they do today. Such long-term thinking requires great statesmanship and determination from our political leadership across major parties. They have to be made to recognise the huge advantages to the nation in doing so. Former Railway Minister Dinesh Trivedi might just have started that process.

The writer is a special invitee to the National Executive Committee of the BJP. rvs@vsnl.com