Rail Budget 2014: Is Gowda hinting at corporatising the Indian Railways?

  FP Vivian Fernandes  Jul 8, 2014 19:15 IST

Is the railway budget as deceptive as the man who presented it to Parliament? As chief minister of Karnataka, Sadananda Gowda, came across as a decent, non-threatening person, but cracked down on corruption, especially that of his PWD minster, which cost him his job, says political reporter Aditi Phadnis.

Tucked away in his speech is a three-line paragraph on 'structural reforms,' which Gowda states as the separation of the policy formulation role from that of implementation because the Railway board has become 'unwieldy'. The minister does not elaborate; perhaps he did not want to alert the resistance. If he actually delivers on this initiative, Gowda will join two other tall railway ministers from my part of the country in coastal Karnataka: TA Pai and George Fernandes.

The railways should have been the locomotive of the Indian economy; they are a drag. This is because it is a commercial enterprise run like a ministry. No railway can thrive with this schizophrenic personality. China Rail was like the Indian Railways till the 1990s. In 1992 and more seriously since 1998, it restructured. This essentially meant separating the policy function, which remained with the government, from the enterprise management function, which is independent of it.

In its 2001 report, the Rakesh Mohan Committee recommended precisely this after studying how the major railways of the world were restructured. It said the Indian Railways must become the Indian Railways Corporation. It must be a holding company overseeing four or five zonal railways which will be hived off into companies. The management board will have a CEO chosen from among the best in the world, with salary to match talent and skill. The freight, passenger, suburban portfolios, and fixed and shared infrastructures will be run as businesses each with a head reporting to the CEO.

The company would remain with the government; as privatization has failed in some countries and would certainly provoke disruptive resistance in India. Multiple private players would be allowed to operate; there would be an independent tariff authority to determine fair terms of engagement. Its advice would be binding with exceptional overriding powers vested in the government. Such a company will be able to raise money from the public by selling equity and debt.

In 2012 Railway Minister Dinesh Trivedi put his job on the line and announced radical measures to make the railways fit for the country. He created two new posts in the Railway Board for public private partnerships and safety. His successors Mukul Roy, Pawan Bansal and Mallikarjuna Kharge did not pursue the initiative.

Gowda has also invited foreign direct investments in various aspects of the railways except operations. Foreign companies like GE were keen on setting up engine plants under UPA I and II but the railway bureaucracy did not allow this to happen. It has also choked public private partnerships. It is extremely protective of turf and has fobbed every attempt at 'encroachment.'

Gowda will need the Prime Minister's backing if he is attempting a thorough overhaul. The railways cannot be improved in their current structure; they have to be reinvented.

The budget speech had heavy duty emphasis on human safety and passenger amenities, which is welcome. But there is no target-setting. He should have announced that unmanned level crossings, which are a major cause of fatalities, will be eliminated in say three years in mission mode. A similar mission is required for a complete conversion to bio-toilets. If open defection is a health hazard, the railways are too. The minister should have announced that he would present an action-taken report next year; the railways make solemn promises in Parliament but do not keep their word.

I had expected Gowda to emphasise initiatives that bring revenue to the railways. He dismissed the Dedicated Freight Corridor in just one sentence saying civil work contracts for 1,000 km would be awarded this year. The DFC which connects Delhi and Mumbai, and Ludhiana with Kolkata is 3,300 km long. Contracts for 1,100 km were awarded last year. The deadline for completion of the project is 2017. Will the railways miss it once again?

Once the DFC happens, freight will move to it, releasing capacity on the existing lines. On the basis of a study, the Japanese had said in 2012 that when ready, 60 percent of existing freight traffic would move to the DFC on the Delhi-Godhra stretch of the western corridor and 90 percent on the Godhra-Mumbai leg. The existing track could be upgraded to semi-high speed with fencing, flyovers and improved signaling. The cost of upgrading the track to lap the distance between Delhi and Mumbai in 12 hours would be a little over $6.85 billion, it said. If the commute time was to be reduced to 10 hours, the track would cost $16.34 billion.

Gowda has announced a higher freight target for this year as well as an increase in passenger train top speed to 200 kmph in nine sectors. Will he be able to achieve both when the trunk routes are saturated? Perhaps, he should have waited for existing DFC to be operational, and announced new DFCs to complete the quadrilateral. That would have put the railways on track to being the locomotive of the Indian economy.