Rail ministry issues note on proposed regulator

To be tasked with determining tariff and help attract private investment

The rail ministry on Monday floated a concept note on the proposed regulator for the railway sector. Among the Rail Development Authority's key roles are determining tariff, setting efficiency and performance standards and ensuring a level playing field to attract private investment.

The concept note specifically stated that the regulator would not be involved in policymaking and financial expenditure management.

“Streamlining the tariff determination mechanism and fixing tariffs rationally, based both on the cost recovery principle and what the traffic can bear, is an absolute necessity for the railways. This will help reduce cross-subsidy and can improve the market share in freight,” according to the note.

It added that the authority would recommend passenger and freight tariffs considering the cost structure, including all direct and indirect costs such as pension liabilities, debt servicing, replacements and renewals, productivity parameters, market-driven demand and supply forces and future investments.

KEY TAKEAWAYS

• The Rail Development Authority will set efficiency and performance standards, and ensure compliance of these
• Regulator will not be involved in policymaking
• Regulator to determine tariff keeping in mind sustainability of railways
• In case of violations, it will suggest action, impose penalties

“In cases where the government does not accept the suggested tariffs, Indian Railways would need to be compensated appropriately, perhaps through increased allocations in the Gross Budgetary Support or through a suitable mechanism,” the ministry has said.

While determining tariff, the authority will consider the requirement of sufficient surpluses to ensure financial viability and sustainability of the Indian Railways.

In case of violation of efficiency and performance standards, the authority would suggest action to be taken by either parties and impose penalties.