With Mamata gone, it's time to abolish the Rail Ministry itself

Now that Mamata Banerjee is safely out of the Railway Ministry, it's time to downsize it quickly. Her replacement is a political lightweight called Mukul Roy, and the Prime Minister's Office (PMO) has stepped into the picture to see that he doesn't rule (misrule) the ministry the way Mamata did.

The problem with the railways is simple. It is India's biggest central ministry in terms of size, employing nearly 1.4 million people at last count. About 40 percent of the government staff belong to the Indian Railways, and that's a huge voter base to command for any politician. It is the only ministry that gets to present a budget annually, and spend thousands of crores in favoured political constituencies.

The number of people employed by the railways is even larger than the Indian Army, Navy and Air Force combined.

That's one reason why the ministry should be downsized, but not the main one. The point is the Indian Railways is a commercial organisation. It has its own products, markets, revenues and costs, and its own balance-sheet. It is India's largest public sector undertaking. It needs to become a company - or several companies, in fact - to deliver on its commercial and social objectives. It cannot remain a departmental organisation that can easily be run to the ground by ministers according to their whims and fancies.

Privatisation of parts of the railway system can be considered, with government owning a golden share of 51 percent with no commercial interes. Reuters

According to a report in Business Standard, the prime minister has "tightened his grip" on the ministry, with the Railway Board announcing that all projects above Rs 100 crore will be handled by the PMO. The report also said that higher grade administrative appointments will be handled by the PMO - if Mamata let's them, that is.

This is exactly the opposite of what should happen, unless the PMO is merely stepping in to handle the downsizing. The Indian Railways can't be run by a diligent PMO any more than it can by a wayward Railway Minister. The idea is to do away with the concept of a minister running a commercial undertaking, not add more commercial decisions to the PMO's plate. While Mamata may have been particularly perverse in reducing the Indian Railways to West Bengal Railways, the reform would be needed even if we had a more benign Railway Minister.

But what exactly do we mean by downsizing? First, it's not about cutting manpower, because that will happen over time and without pain if the zonal railways are converted into companies with a clear charter to be run professionally and efficiently. Social projects can be bankrolled directly by the Union Budget. So, if you want to put up an unviable project to connect Arunachal to Eastern India, the Centre should fund it, not the North-Eastern Frontier Railway. Or there could be a separate corporation like the Konkan Railway to run it.

If this corporatisation is done - and done quickly while Mamata is preoccupied elsewhere - India would have 10-12 railway companies. For example, a Western Railcorp to run what is now the Western Railway, with a Chief Executive to head it. And so on.

Second, downsizing means these public sector corporations should, over time, face managed competition. Not a free-for-all, but through the creation of new rail lines under private ownership, or the running of private trains on existing tracks. If it all works, privatisation of parts of the railway system can be considered, with government owning a golden share of 51 percent with no commercial interest (i.e. it will receive no dividends). The golden share will entitle it to overturn or modify commercial decisions that are not in the public interest. It can gift itself a golden share in new private railway companies, too.

The third thing is to have a railways regulator who will ensure that competition is fair, fares are reasonable, and serve as a quasi-judicial authority to supervise and settle disputes. Just like Sebi or RBI.

The only thing in the current set-up that need not change would be the Railway Board, which has to ensure standards and smooth connectivity. Just as the telecom regulator ensures that all networks can connect with any network, the railway regulator will make sure that the various track technologies and systems adopted by various railway companies can work smoothly together.

So, what would happen to the Railway Ministry itself?

Well, it would be subsumed under a larger Transport Ministry that would look at policy-making in surface transport, waterways, aviation and railways, among other things. What it won't do is run the Indian Railways.

Would all the current ministers lose their jobs? Fat chance. They can always be heading mini ministries under the omnibus Transport Ministry. But that's another story.

Published Date: Jun 01, 2011 11:43 am | Updated Date: Dec 20, 2014 03:50 am