Indian Railways – Soon an Independent Regulatory Authority to Set Fares
Indian Railways – Soon an Independent Regulatory Authority – The ministry plans to get it approved by the Cabinet as soon as possible and introduce it in Parliament in the budget session.
Coming soon — an independent regulator for the Indian Railways that will be empowered to set fares. Except that its name will neither have the words ‘independent’ or ‘regulator’.
This in essence are the contours of a landmark reform being planned for the railways that will see power to fix fares being transferred from politicians to technocrats and based on economics rather than populist considerations.
The Railways Ministry, according to sources in the railway bureaucracy, has finalised the contours of an independent tariff and freight regulatory authority whose job will be to delink the fare and freight structure from political exigencies and at the same time resolve disputes and ensure a level playing field for private investors.
With financial health of railways taking precedence, the draft says that if the government does not accept the tariff suggested by the regulator, it will have to compensate the organisation appropriately, “perhaps through increased allocations in the gross budgetary support or through a suitable mechanism”.
The ministry plans to get it approved by the Cabinet as soon as possible and introduce it in Parliament in the budget session.
The proposed body is also likely to be called Railway Development Authority, in keeping with the “bloodless coup” strategy of technocrat Railway Minister Suresh Prabhu who is said to be keen to effect far reaching changes in the country’s largest employer without raising the hackles of its wellentrenched unions, bureaucracy and the political class. The Railways has mostly been used by successive governments as an instrument of dispensing patronage with scant regard to its economic health. The result: fares haven’t kept pace with inflation, leaving the railways with extremely poor operating parameters, a creaking infrastructure and little or no funds to invest in safety and passenger amenities.
“It (the proposed authority) will be a quasi-judicial body like any other regulator and have sufficient teeth to bite in case of noncompliance. The view is to expand the body beyond conventional regulatory work and increase its scope to make it more comprehensive. It is going to be one of the most crucial reform measures of the government,” one official involved with its drafting said.
The regulator’s task, officials said, will also be to resolve disputes and ensure a level playing field for private investors. The presence of a regulator, they said, will go a long way in improving the financial health of the railways and make it more attractive for private investment.
A draft of the proposed regulatory authority will be put up on the railway ministry’s website on New Year’s eve to invite comments and suggestions from the public. A version of the draft has already been circulated among industry stakeholders and feedback from them incorporated.
When contacted, Prabhu only said the proposed body will “besides fixing fares” also “set efficiency parameters”.
Railway ministry officials said the regulator will also be tasked with setting benchmarks for the railways for passenger amenities and have an operational efficiency matrix in place.
However, safety audit will not be under the purview of this regulator. “The mechanism of Commission of Railway Safety (CRS) seems to be functioning well. It is already independent as it works under civil aviation ministry,” one official said.
Officials underscored the importance of setting up an independent regulator to attract muchneeded private investment into the railways sector. “Since railways want to encourage and promote private investments, resolution of disputes will be a crucial role of the regulator. The fact that railways have a dominant monopoly has been a constant source of disputes and complaints in PPP (public private partnership) projects. Private investors are wary of investing in the sector. This will be taken care of,” another senior official explained. Independent experts too said that a regulator was a must for the railways.
“It has to ensure that a proper risk allocation matrix is put in place for PPP projects. Suburban traffic must also come under regulator’s purview and it has to ensure that railways do not abuse their dominance in terms of providing basic amenities like cleanliness and security to passengers,” said Vinayak Chatterjee of consulting firm Feedback Infrastructure.
It is a good idea to set up an independent tariff and freight regulator for the railways. This will reduce the scope of the railways being used as a political tool by giving benefits that are financially and commercially unviable. It will end the practice of freight and upperclass passengers subsidising lower-class fares, and tariffs will reflect actual costs. More important, realistic tariffs will help revitalise freight transport by rail. This has the added benefit of lowering emissions from the transport sector, and affecting a reduction in the country’s oil consumption, most of which is imported.