April 2016

EDITOR Devangshu Datta

Indian Railways has to tackle multiple challenges. It faces competition from a number of modes of transport – road, airlines and even from inland waterways. IR’s share of freight and passenger traffic movement has been eroded. The extant network is also massively congested. Its finances are under severe stress and current profitability is in question. The fiscal burden is also on the rise with the wage hikes recommended by the Seventh Pay Commission.

Huge investments are required to upgrade and expand the network, induct new technology and improve safety standards, and monetise underutilised resources such as stations located on prime real estate. At the same time, IR must operate on rational, commercially sound principles to be both competitive and profitable. It must also continue to fulfil its social role in enabling urban and suburban commuter movements and connecting far-flung parts of India.

All these needs cannot be met by internal resources alone. And many of these go beyond the merely financial. IR must seek funding and technical support from a number of sources, as indeed it is doing. It can borrow from the market; it can tap institutions like the ADB, and the World Bank and JBIC for cheap long-term loans; it has to receive enhanced budgetary support from the centre; it must cooperate with various states and with ports and mines to build specific links. It has to hasten its internal processes to ensure that new technology is inducted and new equipment manufactured at speed. It must also look at revenue sources such as advertising.

None of this is in itself impossible, but the scale of the task is huge. The Railway Budget is a progressive document which outlines what IR must do. The near-term targets may be missed since finances will get more stressed. The operating ratio will get worse and overheads will rise as wages are hiked.

The long-term targets will only be achievable if the political will exists for consistent, rational support for IR’s needs. Politically expedient decisions such as raising freight rates to uncompetitive levels while subsidising passenger fares have contributed substantially to IR’s financial stress. This must not be allowed to continue in the future, or else, IR will lose more ground and may never recover.

Creating an independent regulatory authority would certainly be useful since it would bring comfort to partners in joint ventures and PPP projects. IR also needs to reform internally. The technocrats running it must learn to be more sensitive to customer demand and more oriented towards the provision of higher quality services. If IR is to remain India’s premier transporter, it must learn to take fast, flexible decisions with an eye on the bottom line.

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