Governance Now Visionary Talks Series

Railways overhaul begins with Bibek Debroy's plan to junk rail budget

Panel on railways for independent regulators, involvement of states in stations construction

GN Bureau | June 12, 2015


#Indian railways   #privatization   #states   #private player  


Suggesting some out of the box solutions to the mammoth railways’ problems, the Bibek Debroy committee on the restructuring of Indian Railways seeks involvement of states and private sector.

The report is being presented to the government today (Friday). It has set targets and time frame for implementing its recommendations which also includes setting up of an independent regulator.

The panel also said that if all its recommendations highlighted for the first five years  are implemented the annual railway budget could be phased out. The main suggestions include creation of a independent regulator, reorganisation of the railway board and reorganisation of group A railway services.

It felt that the budgetary support to the railways could be mentioned as a paragraph in the union budget and no more.

It also gave a firm timeframe to achieve the recommendations, which are divided into one span of five years and another of more than five years. In the first five years, it suggested major initiatives like reorganisation of the Railway Board, creation of an independent regulator, reorganisation of Group ‘A’ railway services, revision of dividend policy, etc.

The committee also recommended expanding the powers of station managers, also known as station superintendents, and not limiting these to commercial powers.

it says, the railways  must also tap into extra-budgetary sources of funding such as multilateral funding agencies. And, change its investment strategy through ring-fenced investments in high-yield projects. Also, more remunerative activities like station development must be separated as SPVs involving the states.

For the next five years, the committee envisages a scenario where IR has six production units, each headed by a GM, all production units are placed under a government Special Purpose Vehicle (SPV), whose directors are chosen through the Public Enterprises Selection Board, coaches  and locomotives are produced in the private sector and the independent regulator resolves access to track issues for not only private train operators but also for IR zones, which compete with each other.

The panel said its recommendations had three pillars -- commercial accounting, changes in human resource (HR) policy and the independent regulator. The regulator will have quasi-judicial powers, with the functions of rate and safety regulation, fair access regulation, service standard regulation and licensing, and setting technical standards.

Officials said the Debroy panel has also called for separation of social objectives and their costs – Rs 25,000 crore annually -- for IR from commercial considerations. The committee also asked for adopting the Kakodkar committee’s recommendations to improve safety.

Private players may be allowed to run passenger trains. While there was talk of private sector role in freight, this is the first time a move is being made to bring it in the running of passenger trains.

The Debroy panel has pitched for attracting talent from outside for a radical revamp of the lumbering state-owned behemoth.

The radical measures suggested include, switching over to commercial accounting of railway functions, corporatization of railways production units and involving private sector in manufacturing coaches, wagons and locomotives.

Remuneration part
Commenting on the organizational structure of the railways, the committee has said that it has become an overly centralized and hierarchical organization. Its departments worked in separate silos and that has adversely affected the work culture. The panel suggested rewriting of some of its staffing rules in order to attract outside talent and restructure the house along business units for ushering in efficiency.

Full report: Click here

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