Chuk-Chuk-Gadi…

  • SumoMe

“Chuk-Chuk-Gadi” – one thing which is a very important part of our life, from a very early age when we get a toy model as a gift, to our first summer vacations, to daily travel for work, railways have a very important place in the common man’s heart.

In the world’s largest democracy and today’s age of coalition politics, railway ministry is always kept aside by successive governments as a Gift of Good Faith’ most crucial for the survival of their government. This important party also, uses this gift to its best use – “As a means to divert more and more trains towards their region in a bid to win over votes and purchasing power in state elections.”  And in a mute agreement the fares are cut down every year, no matter who is in power,
in the name of assuaging pressure off of the common man, when what they actually want is to curtain their ‘Road and Air Transport Sins’. Therefore more than anything else, political motives are the main reason behind government’s monopoly over Indian Railways. And this monopoly with lack of involvement of private sector is the main reason behind the creaking state of countries largest long distance transport medium.

Let me quickly quote some facts before we get into the depth of the subject.

  • Railways were first introduced to India in 1853 by British
    government and 80% of currently used network was built before 1947 with
    the help of Britain.
  • Indian railways has world’s 4th largest (behind USA, Russia & China) and Asia’s 2nd largest railway network.
  • World’s second largest employer (after Wal-Mart) – 1.4 million employees
  • Almost 30 million and 2.8 million tons of freight are carried in Indian rails daily.
  • During 1990-2007 IR built only 960Km of new network compared to China’s 20,000Km.
  • Total track length of China – 91000Km, India – 65000Km.
  • Only about 5% of investment in IR comes from private players.
  • Infrastructure losses of IR account for 1-2% of GDP.

From the above figures and from our common experiences/ adventures it is well established that condition & standards of IR are nowhere close to good enough for a so called emerging superpower and although I know that it is highly improbable that our government is going to take some drastic measures and the fate of IR is going to change dramatically in the  near future, the optimist in me still wants to analyze the condition and suggest some formulas to lift the railways from the wreck it is in right now.  The way forward for the revival of IR is certainly – “inclusion of private sectors and de-regulation of power from the hands of government.”

The functioning of the tracks, stations, engines and bogies infrastructure, ownership, maintenance, operation and management arrangement for railways can be broadly divided into:

1)      Infrastructure development

2)      Ownership and operations

3)      Maintenance

4)      Resource management

5)      Fares, safety and standardization

The transformation from government monopoly to PPP can’t be immediate. It will require time and can only be done in phased manner. Also complete transfer of power for everything will not be a very good idea, for e.g. in case of railway tracks it will be wise if the ownership remains in the hands of government for political, economical and safety reasons. Also having certain amount of control will mean that if certain function goes dysfunctional, government can intervene and do damage control. Also a regulatory body will be required to look over everything, to make necessary rules, and to decide policies and standards.

So I am going to suggest a model and very broad transformation stages. I am diving the whole system into 5 entities and there calling it a pentavalent model.

It involves making 5 divisions of railways:

1)      Divisions for tracks and stations

2)      Division of Commercial carriers

3)      Division for medium & luxury class carriers

4)      Division for tourism and low cost carriers

5)      Regulatory Board of Railways (RBR) – A regulatory body to watch over rest of the     four divisions.

The idea is to involve private sector investment in all 4 divisions with the government keeping certain percentage of shares. While for 2nd and 3rd division controls can be given to private players, keeping ownership of the 1st division with government will be a judicious thing to do because if government has control over tracks and stations, rolling back privatization at the time of crisis will be easier. Also guarding this vast network is a matter of national security which should be in the
hands of government only.

For the forth division, tourism definitely calls for private sector investment and it should be encouraged, but it should be done in partnership with government and tourism ministry. And secondly cheap cost passenger trains will be cheaper if kept in government hands rather than giving it to the business class.

Let us list down these points for a clearer understanding.

1)      Divide railways into 5 divisions as above with government having some shares in first four, 5th division to be governed completely by Indian Government.

2)      Ownership of 2nd and 3rd division goes into private hands, while 1st and 4th remain with the government.

3)      Government can sell some of its existing rolling stocks to private players and they can invest to improve current stock and buy new, the remaining can be                          converted to make it suitable for demands of division 4.

4)      Tracks and station can be given to private players to operate and maintain on lease.

5)      Infrastructure development can be made fully private.

6)      Companies can go public to attract investment.

7)      The RBR to make safety and standard policies, provide license
to private firms and act as a watch guard for all four divisions.

This might lead to some increase in fares but private sector participation will facilitate the technological improvements which will lead to better quality of services and decreased travelling time. Also it will help in decreasing freight road transport load and lead time for goods delivery which is going to more than compensate for the increase in cost. One major flaw in system is that there will be a lot of job cuts if railways are privatized, but this is a price we will have to bear. Although this damage can be minimized to a certain extent with the VRS and CRS policies application for which funds can be generated by selling off railways’ property. Railway colonies can be sold to generate money for these kinds of scheme and the land acquired will create space for industrial and commercial development around stations.

If just by improving infrastructure of railways we can increase GDP growth by 1-2%, imagine how much more can be achieved with a robust railway system.

I hope the train of development riding on a PPP engine arrives before it’s too late…

Vikas Mulchandani

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