Vinayak Chatterjee: The biggest restructuring challenge

Indian Railways needs to radically reshape its organisation. Otherwise the transformational agenda is at risk

Indian Railways (IR) is the eighth largest employer in the world. The 1.4 million employees of IR today need to be reshaped at the potter's wheel of organisation redesign and restructuring to become a cohesive and productive fighting force, battle-ready for the challenges of modernisation, safety, service delivery and competition. An exercise of this nature, as and when undertaken, will be the biggest OD (organisation design) intervention in the world, considering that the other top seven are not known to be launching a similar initiative.

Critics of the prevalent IR organisation point out facets like insularity, political interference, silo culture, excessive centralisation, resistance to change by the unions and low productivity of the workforce. Sadly, the Central Vigilance Commission's 2010 Annual Report mentions IR as the most corrupt government organisation in the country. But there are positive aspects to be harnessed, too. IR has always been characterised by a well-knit cadre of recognised technocrats who have been fiercely loyal to the institution even amidst the worst of times. Not all public systems have this advantage.

Ideas on the appropriateness of the organisation structure date back to 1947. Around Independence, a total of 42 separate railway systems, including 32 lines owned by the former Indian princely states, were amalgamated into IR. In 1952, it was decided to replace the existing rail networks into six zones. IR now has 16 zones.

The organisation "redesign" imperative was brilliantly dealt with in the epochal Rakesh Mohan Committee Report on Indian Railways submitted in February 2002. Few can argue against its recommendations that call for a separation of roles into policy, regulatory and management functions. It suggested that IR must eventually be corporatised into the Indian Railways Corporation (IRC). The government would need to set up an Indian Rail Regulatory Authority (IRRA), which would be necessary to regulate IRC's activities as a monopoly supplier of rail services. IRRA was necessary to distance IRC from the government. IRC would be governed by a reconstituted Indian Railways Executive Board (IREB). The government of India should be in charge of setting policy direction, and constituting IRRA and IREB.

The Report of the Expert Group for Modernisation of Indian Railway (February 2012) under the chairmanship of Sam Pitroda had the following to say: "Organisational reforms are essential to ensure that IR is able to achieve the goals set out for modernisation. The structure of the IR has remained largely unchanged for decades and it remains a functionally oriented institution that is organised around its cadres instead of around its businesses or customers." It then also went on to elaborate the organisation changes desired, with a focus on modernisation.

The report of the Safety Review Committee under the Chairmanship of Anil Kakodkar (February 2012) suggested having a statutory Railway Safety Authority and measures to strengthen the present Railway Safety Commission.

In February 2014, The National Transport Development Policy Committee, chaired by Dr. Rakesh Mohan, submitted its comprehensive report titled "India Transport Report: Moving India to 2032". The report recognised that a pure step-up in outlays for rail would be completely infructuous without a parallel commitment to an institutional overhaul of the entire railway system.

The latest arrow to leave the bow of organisation redesign is the 2015 Bibek Debroy Committee for "Mobilisation of Resources for Major Railway Projects and Restructuring of Railway Ministry and Railway Board". It devolves considerable attention to various aspects relating to the human capital, and human resources reorganisation in IR. This report ruefully says: "As pointed out by many previous Committees, over the years the IR organisation has grown into an overly centralised and hierarchical organisation. The feeling of 'departmentalism' adversely affects the working culture in the IR and has resulted in actions and decisions based on narrow departmental goals instead of on organisational objectives or benefits. To address the issues brought out above, this Committee builds its recommendations on three pillars, namely i) commercial accounting; ii) changes in HR, and; iii) an independent regulator."

It goes on to add: "This committee is of the view that there are too many zones and divisions in IR and rationalisation of the same is required. Further, it is this Committee's view that there must be decentralisation down to the level of divisions and the divisions must be treated as independent business units."

Currently, the railway establishment is keen on the "Holdco-Corporatization" model. A draft Cabinet note prepared in August 2016 outlines the new structure. Thirteen railway public sector units are to be a part of this. According to the plan, the government will pass on its equity in these companies to the holding company. Listing on stock markets is expected to improve public oversight and scrutiny.

Other efforts on the organisation front are underway. An international consultant is suggesting improvements in HR practices. A rail development authority (in lieu of an independent regulator) is under consideration. Based on "Metro Man" E Sreedharan's recommendation some decentralisation of commercial decision-making have been effected. One of the tasks underway is merging the eight services cadres into two unified cadres - technical and non-technical - as suggested by the Debroy Committee.

Clearly, the effort required is humongous. Human resource interventions are often the most difficult compared to operational, technical and financial issues. The task at IR also requires expending huge political capital.

Union Railway Minister Suresh Prabhu, widely perceived to be a visionary and committed to change, requires no persuasion on the importance and immediacy of the task. He has himself gone on record to say that "organisational restructuring will be the key to transformation".

What he left unsaid is that this, as and when it happens, will be the world's biggest organisation redesign effort!

The author is chairman, Feedback Infra.
vinayak.chatterjee@feedbackinfra.com;
Twitter: @Infra_VinayakCh