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On the Wrong Track

Written by Sijal Fawad  •  Region  •  June 2013 PDF Print E-mail

India is at the verge of becoming a global economic power. Though already an influential South Asian country, its railway sector remains in dire straits.

Independent research studies show that the Indian Railways provide employment to 1.54 million people and carry 30 million passengers a day. It is also true that the railway system is one of the most dangerous in the world – a significant number of rail accidents occur every year and there are close to 15,000 deaths on railway tracks alone because of the lack of pedestrian crossings.

Loss of human lives is just one aspect of the dire straits that India’s railway system is in; there’s also the loss of millions of rupees that the state-run enterprise incurs in compensations, repair work and hefty maintenance charges due to inefficiency. For a transport system serving the second most populous country in the world, mismanagement and operational inefficiencies are not just a menace but a reality that the citizens of the country have to bear the brunt of.

The system desperately needs some modernization. Locomotives running on out-dated components are fuel-inefficient, leading to significant losses. About 15 percent of the railway system’s annual working expenditures are spent on diesel, which is getting pricier by the day. Paying so much on fuel expenses alone, the Indian railways could benefit from even a 10 percent reduction in diesel consumption which could save about Rs10 billion (Rs1000 crores) every year.

But it is the system’s overall safety that leaves a lot to be desired. From unmanned railway crossings to unanticipated fire accidents, there’s something or the other leading to countless deaths that can be avoided by having a workable safety mechanism. Influential politicians further deteriorate the flailing sector. Railways ministers have been accused of corrupt practices and misusing the allocated funds for the sector. Only last month, Indian Railways Minister, Pawan Kumar Bansal resigned from his position for allegedly accepting Rs90 lakhs in bribery from a senior railway officer.

Public-Private-Partnerships (PPP) had become the mainstay of the Indian government for rescuing one of the world’s largest railway systems. However the responses from private players have been rather lukewarm. The R3i (Railway In­frastructure Investment Initiative) policy had been initiated a few years back, but bureaucratic bottlenecks and complex legal procedures acted as deterrents for many private participants. The Dedicated Freight Corridor (DFC) project was also initiated to enable better management of higher freight volumes, as well as to improve energy efficiency as far as transport of goods and trade goes. However, the progress on this front has been tardy at best. This year’s budget also announced the introduction of the Train Protection Warning System (TPWS), which is more of a warning system rather than a protection system. The TPWS is based on the European Rail Traffic Management System (ERTMS), but that the TPWS has malfunctioned in the past says a lot about its efficacy in India. It’s also a rather expensive option at a cost of about Rs70 lakhs per km.

Last year in September, a High Level Safety Review Committee was set up to help reduce the occurrence of train accidents. A report by this committee called for setting up pedestrian bridges across railway lines to avoid deaths of people crossing railway lines. “No civilized society can accept such a massacre on their railway system,” quoted the Huffington Post, regarding the crossings deaths.

In the wake of grave concerns arising about the dire straits that its railway system is in, India turned to China, seeking some knowledge exchange vis-à-vis the country’s recently modernized and expanded railway system. The selection of China as a learning partner becomes even more interesting considering that the country recently dissolved the Ministry of Railways (MOR). The MOR’s administrative functions have been transferred to the Ministry of Transport, and the newly formed China Railway Corporation (CRC) will be handling the commercial aspects of running the system.

Just as in the case of India, China’s railway system had also fallen prey to corrupt practices and indifference of those in power. The sheer size of the two railways meant that the organizations wielded a lot of power and clout in the government machinery, making them even more susceptible to the nonchalance and self-interest of policymakers. In fact, China’s railway system even had its own police force and its own courts. Needless to say, the powerful ministries found a way around any needed government reforms, with the common man suffering the most in the end.

When parallels are being drawn, it is inevitable that the fate of the Ministry of Railways in India will be questioned. For a country that had been enjoying stupendous economic growth recently, the railway system ought to facilitate further progress rather than hinder that growth. Analysts are pressing that it’s time for the Indian Railways (IR) to be freed from the government’s chains, as direct government control is affecting both financial and operational efficiency of the organization. Commercially, IR has found a non-conventional competitor in road transport, and to overcome this imbalance, high-speed trains and revival of ignored projects such as the DFC is urgently required. This can be facilitated only if some restructuring that passes on commercial activities to another company sees the light of the day.

The ministry could be split such that planning, policy-making and regulation stay under its control while the new company manages commercial operations such as freight tariffs and passenger fares. Private operators can bid for passenger and freight markets, helping bring competitive efficiency to the system. Similarly, private investment for projects such as high-speed trains should be encouraged to enable better operational efficiency without fiscal concerns for the government.

Overall, any proposed restructuring should follow some basic principles. Firstly, commercial and non-commercial operations should be separated; secondly, competitive bidding needs to be encouraged as far as passenger and freight operations are concerned; and finally, some involvement of the private sector for state-of-the-art projects should see the light of the day.

Even if the ministry follows these principles in some essence, an optimal balance of efficient commercial operations and strategic policymaking could be achieved. 


Sijal Fawad is a Research Analyst at the Business Recorder and is an external student of economics and finance at SOAS, University of London.

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