Indian Railways is getting a makeover. Know how

To restructure the state-owned Indian Railways, the Bibek Debroy committee has come up with proposals of opening up the sector for private firms, establishing a statutory regulator and scrapping the rail budget. The key features for restructuring the Indian Railways are improving the accountability, decentralising the power and setting up an independent regulator.

The panel has submitted its final report to the Ministry of Railways. The report has suggested the eventual bifurcation of the two core functions of the railways - operations and infrastructure creation, according to an Economic Times report.

The report, which will be submitted to Prime Minister Narendra Modi by the end of this month, has been criticised by trade unions, which have condemned it as a call for "privatisation in the name of liberalisation." The committee has said it wants to see the sector freed up so that there will be competition and standards will rise.

"While liberalisation and not privatisation for entry of new operators into railway operations is seen by this committee as a viable option for encouraging growth and improving services, a regulatory mechanism to promote a healthy competition and to protect the interest of all stakeholders is an essential prerequisite," the financial daily quoted the report.

The report of over 300 pages said the concept of private sector entry is already part of accepted railway policy "with the proviso of an independent regulator." The report envisages a railway ministry with at least three secretary-level officers who won't be attached to the Railway Board. They will lay down policy for the entire sector to "ensure competition...encourage private entry and private investments."

The proposed Railway Regulatory Authority of India will work within the ministry's policy framework. The current Railway Board will confine itself to the Indian Railways.

"The board itself might be pruned to having only five secretary-level officers from the present seven. It will be up to the regulator to decide technical standards, set freight rates and resolve disputes. The regulator can recommend fare revisions but these will not be binding on the railway ministry," it said.

The current Indian Railways accounting system doesn't encourage investment, it said. The report has recommended the establishment of a responsive and transparent accounting and costing system in a time-bound manner as the first step toward a commercially viable railway system.

"A monitoring agency, supported by domain experts from outside the system should be constituted and a clear roadmap be drawn with timeframes for constituent activities," it said, adding that these reforms should be carried out in not more than two years.

The recommendations of the Debroy committee, set up by Modi in September, suggest means of resource mobilisation, calls for gradual changes to the decades-old structure over the next five years to be followed by more critical ones thereafter.

Trade unions fear the entry of private companies could jeopardise jobs and further erode the railways' financial health. As a result, the All India Railway Federation (AIRF) has called for observing June 30 as Black Day in protest.

The report has also suggested a three-pronged approach that the government should adopt beyond five years, including setting up Indian Railway Manufacturing Co., a special purpose vehicle that would house all the existing production units to protect them from the private sector.

"A case for bifurcation may be considered between the Indian Railways Infrastructure Corp. and rest of Indian railways as train operators in competition with private operators," it added.

Economists have welcomed the report, saying it lays down a long-term roadmap.

(Image: Indiatimes)