The government's plan to set up an independent railway tariff authority has hit a roadblock. According to newspaper reports, the original proposal of the railway ministry to set it up through an executive order has been rejected and instead the government now prefers to obtain legislative approval for it. It may be argued that statutory approval by a law in Parliament for a regulatory body will provide sanctity and durability for the new institutional framework. But it is not clear if this was necessary because obtaining prior legal sanction could turn out to be a long-drawn process, delaying the accrual of many benefits the Indian Railways would have derived from the creation of such a new regulatory structure.
The Indian Railways is a commercial entity. There is, therefore, no reason why it cannot set up a body through its own administrative directive, particularly when this comes along with an endorsement by the railway ministry. Moreover, regulatory bodies in the past have been set up through executive orders. The regulatory body for pension funds was created initially through an executive order and it functioned for several years before the necessary legislative sanctions were obtained. The stock market regulator, too, had a similar history. There is, therefore, no reason why the same sequence cannot be followed and why the nation must be made to wait for some more time before it can have a regulatory body for railway tariffs. Finally, if the presentation of the Railway Budget could be merged with the general Budget without any discussion in Parliament, the decision on a rail tariff authority, too, could have taken the same route.
There is yet another problematic issue. The railways are in dire need of an independent body that can set, on commercial principles, haulage rates and passenger fares. Cross-subsidisation of passenger fares with higher freight has undermined the railways' finances and their attractiveness as a transporter of goods. This practice should end at the earliest and a rail tariff authority would have been a welcome beginning. And if subsidies have to be given to the needy sections using railway services, these must be provided explicitly without tinkering with freight and fare structures, which inevitably leads to leakages and poor targeting of such benefits. If one of the purposes of merging the Railway Budget with the general Budget was to depoliticise the exercise of managing the railways, then that goal will not be fully realised without an independent rail tariff authority. Given the long delays in legislative processes in this country, waiting for Parliament's sanction before setting up the railway tariff authority will be counterproductive.
There is an additional risk associated with merging the presentation of the Railway Budget with the general Budget without the creation of an independent rail tariff authority. Even as the convention of separately presenting the Railway Budget is discarded, the Indian Railways must simultaneously tighten the process of framing its investment plans, monitoring project execution and evaluating schemes in order to improve its customer focus and upgrade service quality. Merely merging the Railway Budget with the general Budget without the corollary steps of quickly setting up a rail tariff authority and beefing up the project appraisal system to improve services will bring about only cosmetic changes to the Indian Railways.
