Cover Story

Selling family silver

The recent merger of various Indian Railways services seems to have ruffled many feathers. In the corridors of the Rail Bhawan, it’s being interpreted as a ham-handed approach to address the various problems that plague the world’s biggest railway network. Experts view the latest move by the Railways Ministry as the cynical first step towards privatisation of the Indian Railways, instead of trying to address the systemic issues that have adversely impacted its Operating Ratio, affecting its modernisation plan, expansion and efficiency. The sweeping changes that the ministry is trying to ram through also mark the beginning of the end of a welfare enterprise that provides a cheap means of transport to the country’s poorest of the poor. In a bigger context, this is, perhaps, the first clear signs of the end of a welfare state. It’s also apparent that the government is in no mood to learn from the disastrous consequences of privatisation of Railways in other countries, especially in Latin America and Africa, as it embarks upon dismantling the superstructure of transportation in India, writes Srinand Jha COVER STORY / railways / policy analysis / by Srinand Jha
Vol. 13 | ISSUE 10 | JANUARY 2020

Selling-family-silverFACED with an existential challenge of continuing to shoulder the humungous exercise of operating 22,593 trains (9,141 freight and 13,452 passenger trains) daily, the government has apparently decided to exit from the rail transportation business. Following the December 24, 2019, decision of the Union Cabinet to merge the eight Railway services into a single Indian Railways Management Service (IRMS), the process of the dismantling of the superstructure of the Indian Railways – the last of the monopolies of the India government – has been initiated.
Shortly after the BJP assumed power in 2014, the 162-year-old practice of the presentation of a separate Railways budget was done away with in 2016. Subsequently, Zonal General Managers were empowered to take bigger administrative and financial decisions; independent of what had been the all-powerful Railway Board.

With the Union Cabinet having simultaneously deciding to provide for lateral entry to private stakeholders and experts as Independent members of the Railway Board, the path seems to have been cleared for the privatisation of the Indian Railways.

Legacy Issues
Let this be said upfront: Several committees of experts including those headed by Prakash Tandon, Rakesh Mohan, Sam Pitroda and Bibek Debroy had recommended the unbundling of rail operations as a measure of ramping up organisational professionalism and efficiency.

The challenges of India’s state-owned transporter are many: Its Operating Ratio (calculation of paisa earned against each rupee spent) has been hovering alarmingly around 95 percent in the past decade. For the 2018-19 fiscal, the OR was placed at 98.4 percent. This means that for every rupee earned by the Railways, it spent 98.4 paisa.

Instead of eight members, the Railway Board will now consist of only four members (Member Infrastructure, M-Rolling Stock and Traction, M-Finance and M-Operations and Business Development), apart from the Chairman Railway Board, who will have the additional designation as the Chief Executive Officer

Through past decades, the 68,400-km long network of the Indian Railways have remained hopelessly clogged; with 80 percent traffic continuing to be concentrated along 40 percent of the lines on the national grid. Track and signalling systems need upgrade; rolling stock needs to be modernised or replaced; while infrastructure expansion has not happened at the desired pace. Passenger services have continued to cause a huge dent in rail finances, with annual losses in this segment estimated at around Rs. 30,000 crore.

At the same time, the rail officialdom has continued to live in a time warp of its “glorious past”, while the organisation’s problems have incrementally multiplied.

According to an internal report, of every rupee that the Railways earn today, 63 paisa are spent towards salaries, pensions and allowances, while fuel accounts for another 15 paisa – leaving meagre funds for modernisation and capital upgrade.

Selling-family-silver-2Of the 23 million passengers carried each day on the 13,542 trains, a huge 93 percent of travellers are from the Unreserved or Suburban Class – which contribute only six percent of passenger revenues. A substantial chunk (27 percent) travel in the Sleeper (Ordinary) class, but this category also brings in a paltry 11.6 percent of passenger revenues.

Growth in Upper Class, meanwhile, has been falling: From a 9.5 percent in 2014-15 to 5.01 percent in 2015-16, indicating a trend of migration of such passengers to air travel at a time when the price gap between rail and air travel has been narrowing. Correspondingly, the Civil Aviation sector clocked a healthy growth rate of over 20 percent for 2015-16. An even more disturbing figure brought out in the study report: For travel distances of less than 500 Km, the preference of 25 percent rail passengers is for air travel.

Tariff rationalisation has remained a problem area. But this is not the biggest of concerns today.

What the merger means
Instead of eight members, the Railway Board will now consist of only four members (Member Infrastructure, M-Rolling Stock and Traction, M-Finance and M-Operations and Business Development), apart from the Chairman Railway Board, who will have the additional designation as the Chief Executive Officer.

The official version is that the initiative has been taken with a view to end what in railway parlance is called “departmentalism” and expedite decision making, as the turf war between the various departments will get eliminated.

SUCH arguments have a converse side as well. For one, what is called departmentalism, also has it’s positives towards encouraging and nurturing the cultural ownership of technology. All technological breakthroughs, innovations or the “jugaad” that have happened in past years have been made possible because officers and employees of a certain department have specialised and invested in such activities. “With the decision to merge the Services in one go and in rather abrupt a manner, a culture of neutrality will set in, which is not such a good thing from the point of view of technological research and advancement”, a senior ministry official said.

Is departmentalism being perceived is a bigger demon than what the current political dispensation seems to be imagining? Facts on record seem to indicate that departmentalism ought to have been the least of the worries of the current dispensation

Meanwhile, there looms the question: Is departmentalism being perceived is a bigger demon than what the current political dispensation seems to be imagining?

Facts on record seem to indicate that departmentalism ought to have been the least of the worries of the current dispensation.

As former Railway Board member Subodh Jain points out, the radical “Uni-Gauge” policy (converting all Meter Gauge and Narrow-Gauge lines into Broad Gauge) had been adopted and executed in the early 1980s during the tenure of Mohinder Singh Gujral as the Chairman Railway Board despite inter-departmental disagreements. In the same period, the decision to abandon the use of the marshalling yards and steam loco sheds was executed without much of resistance.

selling-family-silver-3SUBSEQUENTLY, following the introduction of the Computerised Reservation System (CRS) Freight Information System) was introduced, a whole contingent of freight booking and ticketing clerks had been up in arms; but the Railway Board was able to get its way through. During Lalu Prasad’s term as the Railways Minister in UPA-I, the controversial decision to increase axle-load of freight trains was executed, despite strong resistance from the engineering department officials. More recently, following the BJP government’s decision to go in for “complete electrification”, the Varanasi-based Diesel Locomotive Works (DLW) – which had developed an expertise of sorts in diesel loco manufacture – was instructed to build electric locomotives henceforth and the decision has been accepted. In 2016, the Railway Board decided to shut down the 132-year-old Indian Railway Institute of Mechanical and Electrical Engineering at Jamalpur and not a whimper was heard.

Therefore, the logical question: If departmentalism was not hampering rail development, what could be the motives of the current dispensation in rushing in with the services merger plan in such manner?

The Privatisation Plan
The answer to the question is perhaps implicit in the pattern of current developments. For instance, it seems no coincidence that a day before the Services merger announcement, the Railways floated global competitive bids on December 23 for procurement of propulsion systems and electrical peripherals to manufacture 44 numbers of train-sets proposed to be run as the Vande Bharat Express (Semi-high-speeds with a design speed of 160 kmph). The Chennai-based Integral Coach Factory (ICF) had earlier built two rakes of the Vande Bharat in record time at a reported low cost of approximately Rs. 100 crores per rake (train). These are having a trouble-free run on the Delhi-Lucknow and the Delhi-Katra routes.

Following the cancellation of the earlier contract, the new bidders, which are likely to include global transportation firms such as Siemens, Alstom or ABB, are likely to demand a higher price for Transfer of Technology (ToT). “With the new Vande Bharat trains likely to cost approximately 20 percent more, it is unlikely that the Railway Board will manage to go through with the project. It is difficult to understand why the Railways have floated the new tender. There is huge uncertainty about the plan. The tenders are unlikely to go through. It seems that the plan has been intractably delayed,” a senior ministry official said.

The disproportionate media focus on Railways Minister Piyush Goyal’s plans to allow private players to operate 100 passenger trains on 150 routes also seems flawed. While the Indian Railways expects to generate approximately Rs. 17,000 crores by way of haulage charges and other services, the fares in such trains are likely to be steep.

For example, the Delhi-Lucknow fares of the Shatabdi Express are in the region of Rs. 800, while the tariffs of the privately run Tejas Ex-press—on the same route— are about Rs. 1,600. One hundred private trains might well be seen as a blip in the cosmos of the Indian Railway network that operates over 22,000 trains daily, but these are likely to have a significant and adverse impact on the operations of Mail and Express trains that zip across the mainline network of the Indian Railways.

According to the terms of the contract being finalised, the Railways will get lesser share of the revenues in case of being unable to ensure punctuality of these trains. The private parties will have complete freedom to fix fares and book tickets in advance. While bookings for trains run by the Indian Railways can be done 120 days in advance, private train operators can book tickets for a year in advance, according to the terms of the contract being finalised. With rail travel in India being supply-driven, it is quite likely that a private train operator can recover lease and other costs on the day of the launch of the train itself!

TO come to the sum and substance of the matter: If the plan is to incrementally increase the number of private trains in future, one must well prepare for a situation when the option of affordable train travel will become unavailable to Indians in the low-income group bracket.

The disproportionate media focus on Railways Minister Piyush Goyal’s plans to allow private players to operate 100 passenger trains on 150 routes also seems flawed. While the Indian Railways expects to generate approximately Rs 17,000 crore by way of haulage charges and other services, the fares in such trains are likely to be steep

Bread and butter Issues
Services are bad and the Indian Railways might well have the dubious distinction of being among the most corrupt of government organisations, but the public transporter—for all its imperfections— has served at least one big purpose in the decades since Independence: That of integrating the nation by way of providing for affordable travel to all categories of citizens, including underprivileged sections of society.

For instance, it takes just a Rs. 25 fare to travel the 90-kilometre distance from Delhi to Shamli in the unreserved second class. In the General Class, one can travel the 997 kilometre Delhi-Patna journey for a fare of Rs 255, which is about double the cab fare from Noida to the New Delhi Railway Station.

Indian-RailwaysOver past decades, the so-called “populist” Railways Ministers such as Lalu Prasad and Mamata Banerjee also invested in building branch lines to connect remote locations: Khurja-Meerut or Kasganj-Kanpur, for example. These lines are mostly underserved and do not help the Railways generate an adequate Rate of Return on services. But the existence of train connectivity of such sort has had a huge contribution towards national development.

If throngs of labourers from Darbangha can today work as masons or carpenters in Kerala, Maharashtra or Karnataka, it is the Indian Railways that facilitates such activity. If the option of affordable train travel had not existed, the Green Revolution of Punjab might just not have happened; neither would Capital Delhi have had the glitzy malls and leaping flyovers.

Rather than applying itself to the critical but less publicity-generating task of facilitating better amenities to the underprivileged sections of passengers, the BJP government’s focus has seemed have centred around capital-intensive and high- sounding projects.

While the speed of ordinary passenger trains actually decreased from 33.9 kmph in 2016-17 to 33.8 kmph in 17-18 (source: Railway Year Book 2017-18), preoccupations of Railways Minister Piyush Goyal seems to centre on the execution of Prime Minister Narendra Modi’s pet project of building the Mumbai-Ahmedabad high-speed corridor to run bullet trains at a top speed of 350 kmph.

Since the BJP government first assumed power in 2014, the speed of freight trains has marginally come down (from 23.4 kmph in 2015-16 to 23.3 kmph in 17-18), but the official PR machine has been going hammer and tongs about the launch of luxury products such as the Tejas, Humsafar or the Vande Bharat trains.

AGAINST the desired norm of providing for at least four unreserved compartments in the Mail and Express trains, no more than two such coaches are usually attached to such trains, officials said. Unchlorinated and contaminated water continues to be supplied at major railway stations and in the trains, as several reports have indicated. The problem areas are far too many.

Rather than worry about such matters, the current political dispensation appears to have worked itself up to believe that systemic disruptions would cause immediate troubles but would provide for a glorious tomorrow.

Official thinking in such matters goes along such lines: “Introduction of private trains will enable the Railways to generate private investments worth approximately Rs. 17,000 crores, while the transporter will also reduce its expenses on the manufacture of engines and coaches. From the sale of vacant rail land, it would be possible for the organisation to generate more than Rs. 10,000 crores. Disinvestment of public sector undertakings such as the Container Corporation of India (CONCOR) or the Rail Vikas Nigam Limited (RVNL) will fetch thousands of crore. A plan has also been in readiness to hand over 100 railway stations to private parties on a 35-year lease.

“Such ideas can come from a Railways Minister who is a Chartered Accountant by training. The organisation may well achieve the immediate purpose of balancing the account books to cover up its earnings losses in the short term. But the long-term interests of the Rail-ways cannot be served through such an approach,” former general manager A K Jain said.

The point being driven at is this: It is quite in order to look towards emerging technologies in order to meet futuristic needs. Also, important that processes and systems be streamlined in order to maximise revenues and enhance efficient services. But, remarked an official: “Such activity should not turn into a self-consuming and a self-fulfilling affair. The violent way the services merger plan has been imposed amounts to throwing out the baby with the bathwater”.

The U-Turn
Shortly into its first tenure in 2014, the Narendra Modi government expanded the composition of the Railway Board in order to provide representation to officers belonging to all the eight cadres. If the Modi government has now taken the U-turn, the question is not why it has chosen to do so? The surprise is about this is the way it has sought to carry out this “surgical strike”.

Two weeks into the services merger, there is little clarity on how the decision will get implemented. Reports suggest that an inter-ministerial group comprising officials of the DoPT, Railways and the Niti Aayog—and headed by Home Minister Amit Shah—will work out the modalities of the exercise within a three-month period. Meantime, the 8,401-strong contingent of the Group-A officers have been left to their own devices.

Officers of the erstwhile Indian Railways Accounts Service have already petitioned the Chairman Railway Board in protest. “Checking and managing finance is a specialised job that functions under the domain of a dedicated cadre both in the government and the private sector. Providing an entry in the service to the engineering cadre officers will be detrimental to the task of managing rail finances,” the petition says.

Officers of the South Western Railways (SWR) have dashed out a memorandum to Railways Minister Piyush Goyal, saying that different roles and skill sets were required to perform the multifarious tasks involved in operating trains. “The merger has provided a disproportion-ate advantage to the engineering services, as officers of these services exist in bigger numbers. Only three of the existing number of 27 General Managers belong to the Civil Services cadre, while the remaining belong to the engineering services,” says the memorandum.

Decades after the then UPA government decided to merge Indian Airlines with Air India, cases have continued to remain stacked up in various courts involving aggrieved officers fighting for seniority grades or denial of salary hikes. Does the services merger decision provide a fertile ground for the eruption of similar kinds of disputes or litigation involving Railways Ministry officials? Should the services merger move have been approached in an incremental manner, rather than a Tsunami of changes having been unleashed at a juncture when the Railways officers are seen grappling with a financial crisis of gigantic proportions? Such questions are continuing to do the rounds of the Rail Bhawan corridors.

The Uncertain Future
Faced with a barrage of criticism on the social media amidst hundreds of post-card complaints forwarded on behalf of aggrieved Railways officers to Prime Minister Modi, Railways Minister Goyal is reportedly to have shot back at the officers at a recent meeting: “Such activities are being watched and not being appreciated. I can run the Railways without you”. The ministry spokesperson confirmed that such a meeting was held but maintained that it was held in a “cordial atmosphere” and that Goyal was not rude to the officials.

The point, however, is: After having ruffled feathers, the Railways Minister does not seem to be sensitive to the need to build trust amongst disgruntled officers. Such a climate does not seem to be bode well.

Another matter of concern: Countries such as Bulgaria, Hungary, Zimbabwe, Ghana and Tanzania have all had a disastrous experience after having privatised rail operations. The Argentinian Railways also merged its services and privatised rail operations in the late 70’s; but the plan flopped. The United Kingdom privatised the British Railways but has continued to heavily subsidise rail operations.

Is India heading towards a similar kind of a situation? As on today, rail officials seem preoccupied with such concerns.gfiles end logo

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