Eyeing corporatisation

Twenty years after the corporatisation of the strategic operational division of the government's Department of Telecommunication (DoT) as Bharat Sanchar Nigam Limited (BSNL) by the then BJP-led government, under Atal Behari Vajpayee, the present government is planning to corporatise a part of another department, the Railways. It is engaged in the production of rolling stocks, including coaches, wheels and engines. The unplanned corporatisation of telecom department operation, which witnessed the transfer of some two lakh government employees to the corporate body, BSNL, is now faced with a kind of financial disaster. BSNL, with 1,74,216 employees till 2018, spent Rs 14,488 crore on its employees' salary account out of its total revenue of Rs 19,308 crore, last year. The company incurred a loss of around Rs 14,000 crore.

The fate of BSNL hangs in balance despite assurances from the government that it will not be privatised and the company's current VRS drive. Interestingly, the government is yet to make a definitive statement about what it wants to do with the telecom PSE — retain it with a massive investment of Rs 70,000 crore, or dump the company as some of its private sector rivals would prefer — to end all speculations. The proposed corporatisation of a part of the Department of Railways, employing nearly 1.5 million people, may prove to be financially as risky as DoT's decision on October 1, 2000, incorporating BSNL.

According to latest reports, the Department of Railways is considering a proposal to set up either an umbrella company to manage all its rolling stocks production factories or set up two public sector enterprises (PSEs) — one for locomotive manufacturing and other for coaches and wheels. A private consultancy firm is believed to be in favour of two separate PSEs. Honestly, the idea does not look bad as long as the proposed PSEs don't become like BSNL and MTNL and become a dumping ground for a section of large surplus employees of the Railways on financial terms similar to DoT's deal with BSNL employees. Arguably, the new PSE rolling stock companies are expected to be fast to bring about technological changes which the country's railway system badly needs for improvement of its operation.

The all-powerful Railway Board had, in the past, did little to turn the rolling stock production facilities as world-class enterprises to modernise the country's railway services. However, at this stage, there is no reason to believe that the government will stop at the corporatisation of its rolling stock production. Many believe, for very good reasons, that it may be just the first step to privatise the rolling stock manufacturing of the Indian Railways. This reminds one of the frightening consequence of privatisation of priceless Railway PSEs such as Burn Standard and Jessop & Co. In the last four years, the government has stepped up disinvestment in PSEs, like never before, to cash in large funds to support its uncovered annual budget expenditure.

The Railways rolling stock production operation currently come under two separate heads in the department — one looking after the mechanical side and the other the electrical side like locomotives. Among the production units of the Railways, facing corporatisation, are Chittaranjan Locomotives (CLW); Diesel Locomotive Works (DLW), Varanasi; Diesel Loco Modernisation Works, Patiala; Integral Coach Factory (ICF), Chennai; Rail Coach Factory, Kapurthala and Railway Wheel Factory, Bangalore. In addition, the Railways is in the process of setting up a modern coach factory at Rae Bareli.

As of March 2017, the Railway's rolling stock consisted of 277,987 freight wagons, 70,937 passenger coaches and 11,452 locomotives. Apart from production for captive use by Indian Railways, these production units also export rolling stocks and components to several destinations such as Burma, Bangladesh, Sri Lanka, Hungary, East Africa, and Central and East Asian countries.

Under an initial proposal made sometime in the first quarter of the current financial year, Indian Railways planned to bundle its manufacturing (locomotives and rolling stock) units and workshops into a new public sector holding enterprise – Indian Railway Rolling Stock Company (IRRSC). The PSE was proposed to be structured along the lines of China's state-owned rolling stock manufacturer CRRC Group. In June 2015, China had merged China Northern Rolling Stock Corporation and China Southern Rolling Stock Corporation to form China Railways Rolling Stock Corporation. The CRRC group is among the world's most modern rolling stocks manufacturers.

The conversion of departmental assets into corporate assets is unlikely to be easy for the Railways without the support of its employees. Historically, the Railways have strong unions, including an apex body called the All-India Railwaymen's Federation. Given its bitter experience in the past, the government is expected to take the railway labour unions into confidence before taking a cabinet resolution to facilitate corporatisation of the rolling stock assets. The nation-wide rail strike in 1974 led by trade union leader George Fernandes, who later became India's defence minister in the Atal Behari Vajpayee government, may still be in the government's memory.

However, times are fast changing. Railway unions, numbering a total of 34, are no longer that strong. Most of these unions are politically affiliated. Erosion of strength of left political parties at the national level has weakened the bargaining power of most of these unions. Moreover, new labour laws, business practices and the emergence of a vastly unorganised services sector have substantially diluted the strength of national labour unions. The ongoing economic reforms are more pro-enterprises than their workers. The corporatisation of the government's departmental operations and their subsequent privatisation are fast becoming trendy. It is a matter of time before the Indian Railways embarks on a new journey by embracing private passenger trains and altering the government-run transporter's basic tenet of overarching control on trains, rolling stock, tracks and manpower. The corporatisation of the Railways' rolling stock operation and its possible privatisation later seem to form an important part of the new government agenda. IPA

Views expressed are strictly personal