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News Entry# 414352
Jul 16 (18:05) Private trains: Opening of Indian Railways will not suffice; comprehensive reforms needed (www.financialexpress.com)
Commentary/Human Interest
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News Entry# 414352  Blog Entry# 4670301   
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The opening of the Railways to the private sector will need a push. The nudge given by Railways minister will not suffice. Gradualism does not work when it comes to cracking state monopolies. Until comprehensive reforms are undertaken and a level playing field established, nothing will fly off the rail.

Private rolling stock on government rails will amount to very little or nothing. Imagine if the 1994 telecom reforms had been limited to Virtual Network Operations riding on the department of telecommunications (DOT) infrastructure with the latter continuing to be a policymaker,
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operator and regulator! Even the expected service level improvements may not fructify if successful bidders turn out to be other than professionally managed companies. The Railways has the example of private catering on trains with no improvement over the departmental one it supplanted.

Given the government still has a four-year term, it only needs a resolve to carry out a meaningful reform rather than frittering energy on sub-optimal tweaking. There is an uncanny template available to undertake comprehensive railway reforms. It is time tested in the analogous transport sector.

Just structure the railways on the lines of the airlines business. The railway stations like the airports can be partly privately managed while mostly remaining with the public sector. Similar to the Airport Authority of India, assets and their management can be entrusted to a Railway Authority of India.

For traffic operations, a Railway Traffic Controller like the Air Traffic Controller may be created. Unlike the airways, the railways need development and maintenance. A specialised agency on the lines of the National Highways Authority (NHAI) will be useful.

A technical body similar to the DGCA can regulate railway operations, infrastructure, personnel, safety, standardisation and related matters.

A Railways Economic Regulatory Authority akin to the Airport Economic Regulatory Authority can be charged with functions relating to tariff and performance standards.

The various Railways undertakings—IRCTC, CRIS, container corporation, coach and wagon factories—will provide hardware and software support, and infrastructure to a burgeoning industry on a purely commercial, non-discriminatory, but competitive basis. They can be structured as free-standing companies without being tied to the apron strings of any operator.

The training infrastructure of the Railways provides a ready to use human resource development platform to the nascent industry. The existing facilities can be brought under the definition of educational institutions.

The Indian Railways (IR) itself can be structured like Air India (AI) into an operating company in a competitive market place minus its policymaking and regulatory function. This will also make it amenable to disinvestment should the government conclude running railways is not the business of the public sector.

Disruption of industrial relations is the most threatening pushback to railway reforms. Some government will have to bite this bullet. It can be strategically defanged. The example of telecom suggests there are no takers for trading the government ID for higher public sector emoluments. It was possible to introduce the National Pension Scheme (NPS) despite depriving civil servants of a guaranteed pension by assuring the continuation of defined benefits to the incumbents. This muted the battle cry of the incumbents and unions. As in the case of telecom, existing railway employees can be assured lifetime civil servant status. New recruits can, of course, be hired on the roll of different entities.

As for the political economy, the government will be in a position to influence development and investments in larger public interest through the NHAI type body. The IR itself can be used like AI to plug market failures. These arrangements will shield the government from any charge of compromising passenger interests or neglecting basic infrastructure development responsibilities.

Doubtless, supporting legislation will be required, something a decisive government with a clear majority in the parliament is exceptionally well endowed to undertake. This is what makes it an opportune moment to execute comprehensive railway reforms.

Finally, Rail Bhawan, pruned of all other functions, will lend itself to be a slim and trim mainstream ministry charged with policymaking. There will be a case though for an integrated ministry of transport which subsumes railways, surface transport, shipping and civil aviation.

The outcome will be a competitive railway business responsive to the market and through it to the customers. The private sector assured of a level playing field, and comprehensive institutional arrangements should be a willing participant. The public sector will continue to operate, but in a competitive environment.

From a public policy perspective, the Railways financed by the taxpayer will cease to be a captive government utility. It will be transformed into a common public infrastructure available to the nation as anything financed by the people ought to be. A reprehensible colonial legacy of funnelling public money to create commercial assets captive to the government will be forsaken. A democracy does not elect a government to feather its nest. It is expected to bear a national perspective, not a departmental one transcending public and private sector divisions. Both are and must be treated as undifferentiated national assets.

The author is Former member, Postal Services Board of India. Views are personal
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