Rebooting railways

The key issue is to enhance the carrier's autonomy

The Union Cabinet on Wednesday decided to scrap the 92-year-old practice of presenting a separate Budget for the railways. Finance Minister Arun Jaitley also announced that the railways would no longer have to pay dividend to the government. This has been a long-standing demand of the railways since paying the dividend effectively took away from the budgetary support that it received on approved investments. But in taking a view on what is good for the Indian Railways and on what basis it should go forward, it is important to note the critical role of adequate autonomy for such a massive organisation.

Any change in practice, such as ending the institution of the Railway Budget, has to be judged by the yardstick of whether it enables the Indian Railways to be more of a master of its own self. The ability to set fares and freight unimpeded by political considerations will add to autonomy. Some progress has already been made in this direction by "rationalising" coal freight and introducing dynamic pricing for fares. But once the proposed regulator - the Rail Development Authority of India that was announced in the last Railway Budget - is in place, the quality of pricing decisions should improve since these will be based on more robust research.

While examining data, the regulator has to look particularly at the carrier losing market share, over time, in bulk cargo. A wagon or a rake is typically suited to carry bulk cargo over long distances because it is cheaper than road transport as well as less polluting. Special attention needs to be paid to the marketing of bulk cargo carriage so as to win users back. Instead, the railways continue to use cargo earnings to subsidise passenger traffic, contrary to the global practice. The railways remain focused on improving the passenger experience without giving much thought to making life easier for those offering bulk cargo. It is imperative to do more on bulk cargo as there is already an effort to promote rivers as waterways. If this takes off, it will be a source of serious competition.

In seeking new areas of business, there is enormous scope for focusing not just on bulk cargo but small cargo, too. Stockists of fast-moving consumer goods as also consumer durables will be delighted if there could be doorstep delivery of consignments in a timely and predictable way. As for passengers, apart from trains being on time, if they ran a little faster with better amenities, travel would become far more attractive.

The corollary to increased autonomy is that the railways must be able to put it to good use so that performance improves. The railways have little control over their most important item of costs: Pay and pensions. So they must improve on operating efficiencies, marketing and project completion. It is necessary to urgently realign the railway board so that it reflects businesses and services. Along with this, it is imperative to change the way railway officials think. Officials are primarily focused on their cadres and standoff between cadres is the bane of the organisation. The railway minister thus needs to focus on what he can do and speed up the pace of change.