Setting new agenda
With an army of 1.33 million employees under its fold, the Indian Railways (IR) today stand at the crossroads to rediscover its relevance and role in shaping India's mobility of its legions of upwardly mobile youthful people. For one of the country's most important modes of transport, IR saw some wrenching changes in recent times, including an abrupt end to its privileged status of presenting its own budget, a colonial practice that survived close to seven decades. The Modi government has not only merged the Rail Budget with the General Budget but also put paid to political allies of the governing coalition using the railways as a gravy train to batten on without qualms to the larger consequences of such patently populist practices inflicting havoc on the spine and sinews of the railways down the years.
The Modi government has not only merged the Rail Budget with the General Budget but also put paid to political allies of the governing coalition using the railways as a gravy train to batten on without qualms to the larger consequences of such patently populist practices inflicting havoc on the spine and sinews of the railways down the years.
So, it is no big brainer to know that the railways have ended the fiscal year 2016-17 with its disastrous operating ratio in 16 years at 96.9 per cent, worsening even from its revised estimates in the general budget. While the final figures for 2016-17 would take a few more months, official sources maintain that there would not be significant alterations in headline numbers on earnings and expenditure fronts which were well-nigh given. Operating ratio is the yardstick of money spent to earn every hundred rupees with the underlying norm that lower the better. With persistent cost-push inflation on inputs services not matched by any revision in passenger fares for far too long, shift away from railways to other modes of transport for freight goods and the implementation of Seventh Pay Commission recommendation boosting wages and pension payouts to legions of its workforce, the finances of the railways are in a parlous state.
No doubt, the NDA government brought some semblance of balance into the precarious finances of the railways with the trained accountant Suresh Prabhu donning the cap of the Railway Minister. In 2014-15, the very first year of the Modi Government, passenger fares for all classes were hiked by 14.2 per cent, inclusive of 4.2 per cent on account of fuel adjustment component. In the next year, while there was no passenger fare hike, the minimum chargeable passenger fare for second class non-suburban services has been increased from five rupees to ten rupees to bring it at par with the rate of platform tickets. The flexi fare system was introduced in Rajdhani/Duronto and Shatabdi trains from September 2016. Under this, the base fare increases by 10 per cent with every 10 per cent of berths sold subject to maximum prescribed limit of 1.5 times in classes Second air conditioned, sleeper, second sitting (reserved), air-conditioned chair car and 1.4 times in air-conditioned 3-tier. Service tax equivalent to 4.50 per cent of the total fare is being levied in the first class and all air-conditioned classes of travel.
Under this, the base fare increases by 10 per cent with every 10 per cent of berths sold subject to maximum prescribed limit of 1.5 times in classes Second air conditioned, sleeper, second sitting (reserved), air-conditioned chair car and 1.4 times in air-conditioned 3-tier. Service tax equivalent to 4.50 per cent of the total fare is being levied in the first class and all air-conditioned classes of travel.
On the freight front, freight rates for all commodities were increased during 2014-15 by 6.5 per cent, inclusive of 1.5 per cent on account of FAC. In 2015-16, the freight rates were increased by 10 per cent along with rationalisation in distance slabs. Alongside, freight rationalisation measures were also put in place which had resulted in a decrease in freight rates for movement of some commodities by rail.
It needs to be noted that the railways are making losses on passenger operations every year because of abject neglect of past revisions due to political compulsions and to the mistaken notion of sheltering travelling public from the rigours of pinching fares. Thus the losses piled up by the system went from Rs 23,932 crore in 2011-12 to a massive Rs 35,918 crore in 2015-16. The railways rather elliptically say the losses they pile up to the social service obligation they are expected to bear. These include, among others, essential commodities carried below cost, passenger and other coaching services, the operation of uneconomic branch lines and new lines opened for traffic during the last 15 years!
With business-as-usual approach no longer a viable option, the feisty Railway Minister announced in the 2015-16 rail budget, the last such one from the system, the setting up of a mechanism for making regulations, setting performance standards, determining tariffs and dispute resolution. The proposed Rail Development Authority (RDA) is envisaged to undertake functions such as tariff determination, ensuring fair play and level playing field for private investments, setting efficiency and performance standards and dissemination of information. It is, however, made plain that the role of RDA is envisaged to be advisory that is laying down principles for tariff determination. However, its orders on performance standards and penalties would be mandatory, providing it with the requisite teeth to go the whole hog in bringing about a root-and-branch reform of the weak system that had consigned it to financial straits.
The general expectation is that the RDA might transform the landscape and ecosystem of the IR to make decisions on pricing of services commensurate with costs, safeguard consumer interests, suggest measures for augmenting non-fare revenues, promote competition, foster a positive milieu for investment, promote efficient resource allocation, besides providing inputs for absorptions of modern technologies to make the system tech-savvy to run on the expectations of the gig economy.
Designed as an autonomous institution to be formed through an executive order by the Government to be subsequently beefed up by due legislation, the RDA with an initial corpus of Rs 50 crore would have a five-year tenure. The Centre would appoint the Chairman and three members from a panel of names recommended by a search and selection committee chaired by the Cabinet Secretary, the other members being the Chairman of the Railway Board, Secretary in the Department of Personnel and Training and the Chairman of another central regulatory body nominated by the Cabinet Secretary.
A latest report placed in Parliament by the Railway Convention Committee (RCC) on the share of railway traffic vis-à-vis road and air transport, the high freight rates in recent years together with the other factors that have caused decline in Railways' share of freight traffic include under-investment in building up rail transportation capacity over the years. Besides, a majority of the rail freight basket being confined to a small group of bulk commodities with coal constituting almost 50 per cent of the freight traffic, compulsions to carry only 'train load' consignments. The new RDA would have its tasks cut out in pulling the system from the abyss so that this arterial mode of transport regains its original glory and legacy primacy it commanded to the delight of all rail users and stakeholders.