April 2017

EDITOR Devangshu Datta

The political establishment has consistently sent out mixed signals regarding the multiple roles
played by Indian Railways. On the one hand, IR has to be a key transporter, moving goods and
people across the country and connecting distant zones. This makes it a key engine for growth,
and indeed a strategic asset. On the other hand, IR is expected to deliver social benefits by absorbing
a very large workforce and by subsidising the cost of travel for the bulk of its passengers.

As a result, IR has vast wage bills and is also forced to cross-subsidise passengers by setting
low fares and marking up freight tariffs. As the Indian road network has improved, more nimble
and aggressive road transporters have cut into the freight transportation business and IR’s market
share has steadily reduced. The passenger business has also been hit at the high end especially
by the advent of affordable air travel.

All this has meant that IR is barely profitable and its revenue growth has become somewhat
erratic. IR thus desperately needs vast investments to augment its inadequate infrastructure, to
build new networks and to improve its track record in terms of safety and punctuality. It cannot
fund these investments out of its own internal accruals and is therefore forced to look to the centre
(and other possible sources) for investment.

However, there are signs that the Ministry of Railways is amply aware of the issues and is trying
to put IR back on a sound financial footing. The NITI Aayog has analysed IR’s functions, especially
its social service functions, in a new report.

There appears to be some determination to turn around the underperforming behemoth. This will
require a multi-pronged strategy. For example, IR is looking for new revenue streams, such as through
station redevelopment in the PPP mode. It is also aiming at tariff rationalisation in freight and is looking
at innovative methods of increasing passenger revenues via a dynamic surge pricing model.

There are plans to try and bring private enterprise into the manufacture of equipment and
other IR-related activities. Some of this could tie in with the Make in India initiative, making items
such as rolling stock and signalling gear to boost safety efficiency

IR is also trying to speed up the construction of the dedicated freight corridors and has even
identified several new DFC possibilities. It is implementing a new safety focus, coupled with new
technology. The high speed rail projects are proceeding well, as is the construction of new routes
opening up the Northeast.

It took a long time for IR to lose its pre-eminent position. And, it could take a while to improve
the situation. The positive factor is that the problems have been identified and there is apparent
political will backing the effort to turn things around.

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