Creating a Rail Development Authority for India is among the most significant reforms to an infrastructure system undertaken by the government. The railways connect the country’s far corners and act as a driver of the economy.
High rates of economic growth have raised the demand for travel, but this remains largely unmet. The popular aspiration is for a modern system that offers high-quality travel with low risk of accidents, while industry wants smooth freight transfer.
An independent, empowered regulator could be the paradigm shift that is needed. The proposed Authority would have to ensure that the resources of the system are optimally utilised, overcoming existing inefficiencies that arise from the fact that policy, regulatory and management functions of the railways are intertwined.
As the National Transport Development Policy Committee noted in 2014, the centralisation of all functions in the Railway Board has proved detrimental to the organisation’s growth, particularly at a time when there is a need for massive investment in infrastructure for 7%-plus GDP growth.
Conversely, robust economic expansion further raises the demand for railway services. To reconcile this, the regulator has to identify sectors that can support higher tariffs and also produce greater volumes of traffic. Such accurate interventions are critical if the trend of declining rates of growth in railway freight revenues and volumes, which set in during 2011-12, is to be reversed.
One of the big challenges before the Centre is to facilitate higher non-budgetary investment in the railways.
The Bibek Debroy Committee found the private sector is discouraged from participating more effectively due to a monopolistic framework. Coming up with a system that de-risks private investment and creates a level playing field are among the major challenges before the Rail Development Authority.
In the area of passenger services, this offers several possibilities; the railways cater to some 23 million passengers a day in a network of about 8,000 stations. The experience of consumers in cities shows that use of information technology to deliver traditional services can lead to higher levels of efficiency and lower costs, besides adding jobs.
While regulation of tariffs matching the quality of travel can help raise revenues, the system should be able to move both people and freight faster in order to grow. Inducting faster, more comfortable trains on 500 km-plus inter-city routes would attract new traffic, and help operate cheaper passenger trains to interior areas, as part of the government’s social obligation. Technology upgrades are essential to raise carrying capacity, service frequency and speeds.
Rail reform is complex and what was undertaken in Europe during the 1990s, separating infrastructure from operations, is an interesting model: sequential measures achieved sustainable results, rather than a package of changes introduced at once.
About Rail Development Authority
It will act within parameters of Railway Act, 1989 and undertake the following broad functions: tariff determination, ensuring fair play and level playing field for stakeholder investment in Railways, setting efficiency and performance standards, dissemination of information.
The authority will set tariff based on cost recovery principle and “what the traffic can bear.” All the direct and indirect costs such as pension liabilities, debt servicing, replacements and renewals along with productivity parameters, market driven demand and supply forces and future investments will be considered by the regulator before setting tariffs.