Saturday, October 2, 2010

Railways: India's story till now & the Budget

The Indian Railways sums up the current state of the Indian government’s PSU machinery and the bureaucratic setup of the country. It is a business entity controlling an important component of the economy, yet not realising its full potential. An organisation still split up by its social obligations, bogged down by red- tapism and inefficient public sector wages paid to its employees, who most probably joined because of the employment benefits and pension, than by the task at hand. Just like other PSUs it had seen a successful start, which fizzled soon after.

It is said that responsibility and accountability start from the top. For the Railways, corruption and jugaad originate from the top. There is always a big political hullabaloo before the cabinet is sworn in, and speculation on which political ally will be given the Union railways ministry always abounds. The ‘honourable’ minister is requested for favours for constructing stations or making trains pass through fellow parliamentarians’ constituencies. Adding to that, the preceding minister’s serendipity that it was a cash mine with profits of Rs. 9000 crores(in 2005) after years of successive losses.

The Railways after independence already had a network of around 53,600 route kms. Today, it stands at 65,000 route kms. An increase of just roughly 12,000 route kms of network in 60 years!
Well, the Railways has always been more or less a socio-political entity. But it wasn’t like this always. It was once the symbol of India’s economic pride and by numbers it still is. It has the largest railway network in the world under single management. The Indian Railways carries the most passengers (4 billion) in the world. It is also one of the largest employers (15.8 lakh employees) in the world.

However, it has also been under-performing and has shown relatively little and almost stagnant growth in terms of laying more lines, better freight handling, infrastructure facilities and train wagons. The Railways after independence already had a network of around 53,600 route kms. Today, it stands at 65,000 route kms. An increase of just roughly 12,000 route kms of network in 60 years! It is indeed very shocking that the Railways not taken up any major expansion initiatives. This lack of initiative cuts across many government agencies.

Another major negative has been the cross-subsidisation fare policy of the Railways. Under this policy, the revenue collected from freight charges is used to cross subsidize the losses from the passenger fares collection. Passenger fares have always been kept low as a populist measure, but the ever-rising oil (fuel) prices have been causing massive losses to the Railways. The PM’s Office has even suggested that this system be abandoned in favour of something more relevant and effective. It had suggested passenger fares be indexed to oil prices. But, even this was not accepted in this year’s budget. And so by keeping fares low this year as well, we can again expect it to incur huge losses.
It seems the Railways, like few of its fellow PSU brethren is on a journey with no destination.
Also, a problem characteristic to all PSU is evident here as well. There is no clear roadmap for public-private partnerships. In natural monopolies like the railways it is essential to bring external technology and competition into the system, so as to give consumers a better return for their money. Private players will bring with them funds and expertise, which is vital to revamp the existing Indian Railways.

Like a sail..keep drifting
The railways has to bring its act together, and the process should start from the top. In the current budget, announcements of setting up medical colleges and sports academies are unnecessary money laundering excuses. There was no mention of the ‘world class’ stations, a promise made last year. No mention about modernisation of the machinery and facilities. No more faster trains. No vision, no serious number crunching. It seems the Railways, like few of its fellow PSU brethren is on a journey with no destination.

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