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The Indian Railways is running on empty as far as a happy future is concerned. Finances are not looking up. The latest reports say earnings are taking a beating because of a fall in passenger volumes. The fate of expenses, with higher staff outgo in bonus and dearness allowance, is anybody's guess. To add to these, there has been a spurt in horrendous fire accidents. The worst case scenario is a repeat of last year's act of cutting Plan expenditure to contain overall expenditure. Such a measure will negatively impact capacity creation and safety.
What the railways are capable of is spelt out in its own assessment contained in the white paper of 2009. The share of the railways in India's gross domestic product, or GDP, has been more or less constant at 1.34 per cent during 2003-08. The World Bank has estimated railways GDP to have an elasticity of 1.25, that is, when the Indian GDP grows, say, at 7 per cent, the railways' share of it should grow at 8.25 per cent. But this has not been happening. The railways has been punching below its weight by around 20 per cent during the same period. Though a developing country should have a transport elasticity of over 1 per cent, that of the Indian Railways has been computed at 0.79 per cent.
In contrast, China's high-speed rail system is set to contribute critically to the country's high growth, according to a New York Times report. It started five years ago and traffic is growing at 28 per cent annually. These trains travel at 200 kmph and the network now covers nearly 10,000 km. A World Bank study has found that there is likely to be broad growth in worker productivity in the hundred Chinese cities covered by this network due to the shrinking of distances for workers and customers.
Such rapid growth has certainly had a cost - in terms of displacement of people, corruption among senior officials running the project and questionable means of raising funds for the project. Those affected by the network expansion have been relocated and new urban developments have come up next to high speed stations. The network has been financed by banks with short-term loans, which get rolled over. But experts believe that there is no substitution for long-term loans to finance such a project.
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There is, of course, no dearth of expert advice on how to get the Indian Railways back on track. They date back to 1994 with the Prakash Tandon Committee report, followed by the McKinsey report prepared on behalf of the Asian Development Bank in 1997. The railways also put out two status reports, in 1998 and 2002, under Nitish Kumar, a white paper and a Vision 2020 in 2009 under Mamata Banerjee, and, in 2012, the Anil Kakodkar Committee report on safety as well as the Sam Pitroda Committee report on modernisation.
There is general agreement that the bane of the Indian Railways is "departmentalism" - the traffic, electrical and mechanical sections zealously protect their turf and prerogative, to the detriment of the organisation as a whole. For example, it was long known that wagons could safely bear a higher axel load and were, in fact, doing so, thanks to undocumented overloading which was causing the railways loss of revenue. But the decision to recognise the obvious was not taken until Sudhir Kumar, brought in by Lalu Prasad, got the decision to raise permissible axel load for wagons approved soon after Prasad became railway minister in 2004, with spectacular rise in rolling stock productivity.
One way to fight departmentalism, recommended by the Tandon report, is to merge all the different railway services into a single Indian Railways Administrative Service. But insiders say this will be "a huge task and fraught with hurdles". The real bones of contention, they aver, are posts in the Railway Board and those of general manager and additional general manager for which there is "intensive competition and lobbying". They add that a far better option would be to create a Railway Management Service from which these top posts could be filled. An elaborate evaluation of performance and capabilities through a transparent and documented process would select members of the service from those who have put in ten years.
A related human-resource issue, common to all public sector units, is the system's inability to reward good performance. Currently, the only reward that can be given for good performance is a good posting. Accelerated progression for performers is vital but this can be vitiated by arbitrariness and favouritism if senior managers are themselves not sufficiently professional. There is a chicken-and-egg dilemma here. Professionalise the top management and then institute a reward system or institute a reward system to yield a more professional top management over time?
Corporatising the railways in letter and spirit is a long journey but a good intermediate step is to publish commercial accounts, as companies do, alongside the current system of financial reporting. Commercial accounts will yield a truer picture of the value of assets, rationalise depreciation norms and yield a better picture of current financial health after proper provisioning for depreciation. Say insiders: "The railways are currently engaged in this exercise but bureaucratic inertia is making for slow progress. This is one area where action can be taken without resistance from any sectional interest."
There is also a need to quantify cross subsidies. A lot of inefficiencies reflected in current poor performance are attributed by functionaries to performing national tasks that are uneconomical. The example most often cited is unviable railway lines which are maintained to keep the nation together. More important and more likely to be resisted is computing the cost-benefit balance of starting new passenger trains. There can be an appendix to the railway budget giving this calculation for all new passenger trains announced by a minister. Norms and processes will have to be laid down for computing the subsidy, for which the help of the comptroller and auditor general and a global accounting firm (like PricewaterhouseCoopers, EY and others) can be taken so that they are easily accepted and the numbers generated respected.
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It is imperative to introduce more information technology into the railway system. Properly done, this will add exponentially to productivity, lead to greater transparency, make for more rule based functioning and promote accountability. The case for greater use of IT in optimising use of rolling stock is obvious. Is someone looking for a locomotive when he does not know that one is lying idle in a nearby yard? It is so easy to put a GPS tag on every loco or wagon to know within a minute where it is physically. Going in for data mining and business analytics to determine seasonality of demand and then using it to work dynamic pricing can go a long way in meeting excess demand during school holidays and Diwali, or filling vacant berths in off-season. Delhi-based Centre for Railway Information Systems overseeing the railways' IT effort "sometimes doubles up as a parking slot for those well connected who do not wish to leave the capital", wryly observes an insider.
Decentralisation is a key issue in any large organisation, particularly one like the railways which employs over 1.4 million people. Is there too little of it in the railways? Insiders say that this is one area where a lot has been done in recent years but unfortunately zonal managers who now wield additional powers are often unable or unwilling to generate the necessary momentum. Why? To get the right answer it is necessary to ask: what assures a board post for a general manager - turning in a good performance or having the right connections?
One key railway official, who wishes to remain anonymous, has his own wishlist of what needs to be done. He sees "a critical shortage of funds for investment (without it both capacity creation and safety suffer)" and is hopeful that the reported government decision to allow foreign investment in the railways actually takes off. The dedicated freight corridor with Japanese financing shows the way. He is enthused by Narendra Modi's promise of a high-speed golden railway quadrilateral.
But more importantly, he says, "The organisational structure of the railways needs to change, specifically the Railway Board. It has no common objective. The chairman of the board cannot overrule a member by using a casting vote. There is little that can be done if a departmental head chooses not to cooperate with a particular decision. Hence contentious issues are sidestepped and decisions are driven by departmental considerations."
There are miles to go in doing a better marketing job for the benefit of the railways' customers - like offering door-to-door delivery and in quick time. The dedicated freight corridors will mark a big change by speeding up freight traffic but this needs to be done across the network.
The official says, "It is imperative to again start reducing the number of employees." After reducing the workforce from 1.65 million in 1990-91 to 1.3 million in 2011-12, it has climbed back to over 1.4 million in 2012-13. "The error was to create vacancies without surrendering posts," according to an observer. If individual wages and pension entitlements cannot be reined in, then there is little hope of generating respectable surpluses without reducing headcount. Thus, there is sufficient clarity, particularly among enlightened railway men, on what needs doing. But that is where it stands.
