Modi bites the bullet of railway fare; now he must reform the train

Kudos to Prime Minister Modi for his toughest call in four weeks; while the quantum of the railway fare hike is bold, what’s even more laudable is that passenger fares have been jacked up much more than freight. He has shown he is tough as nails (although, as my colleague R Jagannathan has argued in his excellent piece , the PM’s courage is being belittled by the squeamish manner in which his colleagues are trying to deflect the blame to the UPA, instead of owning up to their leader’s political grit). But now Prime Minister Modi has to shake up the railway bureaucracy, which frankly does not care. If that were the case, accidents would not happen with regularity and lives would not be needlessly lost. Hygiene on trains and in stations would not be so dismal. The poor would not be traveling in unreserved compartments in crush load conditions. Getting a seat or berth would not require weeks of advance planning. Bulk freight, which has a natural fit with the railways, would not move to costlier and more polluting trucks. The old and the infirm would not have to climb stairs at railways stations lugging heavy bags; escalators would have been the norm.[caption id=“attachment_1582353” align=“alignleft” width=“380”]  Costlier rail travel. Reuters[/caption] Sadly, the railway bureaucracy lacks vision. It is consumed by the instinct for self-preservation and that comes in the way of the Railways becoming the locomotive of the Indian economy. This is the only infrastructure sector that has been untouched by reforms. That the Railways exist for themselves, and for the moment, is clear from their financials. Last year, 68 percent of their earnings went into expenses. Pensions took away 16.5 percent. Interest on preference capital was 5.5 percent of earnings. That left just 10 percent or Rs 14,000 for appropriations. The railway share of freight has fallen to 36 percent. It is the Railways which have turned away cargo with their monopolist-mindset. They have not been able to capitalize on their advantage in long-distance bulk cargo. In 2007-08, railway minister Lalu Yadav set a couple of missions. One was Mission 200 million tonnes for steel and cement. Last year, a year past the deadline, the Railways did just 144 million tonnes of these two commodities. Lalu had wanted the Railways to carry 100 million tonnes of container traffic. Last year they did 41 million tonnes. What is the point in setting targets if you can run a truck in the gap from actual performance? As Nandan Nilekani writes in his book, Imagining India “When I visited Sudhir Kumar at the railway ministry, what struck me was that a big part of his job was battling this inertia within the bureaucracy and in the railway regulation. He described his astonishment when on a visit to the Rail Museum he found documents and weight standards for rail track dating from 1922 that were exactly the same as the standards the Indian Railways use now.” This is a risky mindset to have, Nilekani says, when India faces challenges that are unique and daunting… So what should the government do? Augmenting capacity is the first task. China Rail had a smaller network till the 1990s. Now it is bigger, faster and the busiest in the world. China Rail carries more than three billion tonnes of freight. The Indian Railways does a little over one billion tonnes. China Rail has separated the policy function (which is with the government) from the enterprise management function. India must emulate it. The dedicated freight corridors between Delhi and Mumbai, and Ludhiana and Kolkata (or Sonenagar) are lagging behind schedule. The 2017 deadline must be inviolate. The Railways, as the Anil Kakodar Committee on Safety said, have an ‘implementation bug’. In twenty years, between 1992 and 2012, they laid just 2,142 km of new lines. City metros would have been a non-starter if they had continued to be with the Railways, instead of being handed over to the urban development ministry. The freight corridors are likely to go the way of other railways projects. The government must give charge of them to a doer like ‘Metroman’ E Sreedharan or someone of his calibre. High speed bullet trains are very expensive. They will not be financially viable, though there will be economic payoffs. The five-hour Shanghai-Beijing high-speed corridor, which is the same distance as Delhi and Mumbai, cost $32 billion to build – more than the Three Gorges Dam. Secondly, the Railways organization must be re-structured along business lines. The present division of work along functions—electrical, mechanical and so on—just does not make sense. Instead, as the Rakesh Mohan Committee recommended at the turn of the last decade, we need business heads for passenger traffic, freight traffic, rolling stock, tracks and so on. Some of these will be profit centres, others cost centres. The third step should be corporatization (not privatization, which is politically fraught and may not be desirable). There must be a holding company at the top with a CEO, who as the Rakesh Mohan Committee said, must be recruited from among the best in the world. An organization with an annual turnover of more than Rs 1.50 lakh crore deserves nothing less. (To put this in perspective, the total income of Reliance Industries is Rs 3.90 lakhcr) The regional zones must become regional companies. The accounts must be recast. Instead of the present cash system, the Railways must follow the double-entry accrual system. The Asian Development Bank has been financing this project since the middle of the last decade. Ten years is too long a time. Once that happens, Railway accounts will become easier to comprehend. The monopoly of the Railways must be ended. Private investors and operators must be encouraged. Indian manufacturing exports will become competitive when the Railways are able to run longer, faster and heavier wagons and the cost per tonne falls. Currently, the Railways are a high-cost carrier. Imagine seats and berths being available on demand and people being able to travel in comfort. Tourism will get a boost and this will have a multiplier effect on the economy. It will also knit us tighter. Migrant workers will be able to visit their families more often and with less tension. Having given them a necessary price shock, it is now their gratitude that Prime Minister Modi should strive to win.