Opinion | It’s time for Indian Railways to take the reform track

Train travel is the stuff of romance and legend. The mere mention of trains gets middle-aged parents reminiscing about their student days and the serendipitous meetings they had with the most wonderful strangers.

Historians date rail movement back to 6th century BC when boats were moved across land on the Isthmus of Corinth in Ancient Greece. The track bed is believed to have been hard limestone, and the track, a groove shaped into that stone. The boats were pulled on the rails by men or animals. As tracks and motive power evolved, so did rail, moving from wooden tracks in the 16th century to metal tracks by the 18th century. A funicular is a rail car variant used over steep slopes made up of two cars with connected cables that go over a pulley wheel. India’s passenger funiculars operate today at the Palani temple in Tamil Nadu and the Saptashrungi temple in Maharashtra. Steam engines were replaced by diesel locomotives and, then substantially, by electric or diesel-electric hybrid engines over the last two centuries.

Indian Railways (IR) has the fourth-largest rail network in the world, behind only the US, China and Russia. It is a network of 70,000km, spanning 29 states, three Union territories and 8,500 stations. It runs about 21,000 trains, two-thirds of which are passenger trains, carrying 23 million passengers and 3 million tonnes of freight per day. This translates into 1.2 trillion passenger-kilometres travelled a year in India by 8 billion passengers. Using a metric of fatalities per billion journeys, rail is among the safest forms of travel. Measured by distance instead of journeys, air travel is safest, with rail and water travel reasonably safe.

IR easily makes the list of the top 10 employers in the world with nearly 1.3 million employees; the US, Chinese and Indian armies are on that same list, along with Walmart and McDonald’s. These employees are organized into 17 zones and 68 divisions for its activities. Each division has members from a dozen departments: signals and engineering to medical. Each zone is led by a general manager with operational and departmental responsibility, with employees in a matrix reporting relationship to functional heads at the Railway Board (RB). The RB itself was first constituted under the Railway Board Act of 1905. IR has been governed by an administrative structure that has been in place for nearly a century and run on infrastructure that has been upgraded only piecemeal over that period.

To ensure IR meets the requirements of a soon-to-be $5 trillion economy, it needs two types of reform: administrative, to improve services, safety and efficiency; and engineering, to improve cost and environmental effectiveness. Since independence, there has been a reform committee/commission of some type related to IR almost every two years–the famous ones include committees led by Prakash Tandon (1994) on organizational structure and management ethos, Rakesh Mohan (2001) on policy reinvention, Sam Pitroda (2012) on railway modernization, and the latest one by Bibek Debroy (2015) on railway restructuring.

While there are many different reform steps suggested, the various committees agree on two things: That the management organization needs to be radically simplified and that accounting should be in corporate-style, double-entry form. The problem appears to be the political will to get the decision implemented. The Debroy committee’s recommendation to separate the core functions (rail operations) of IR from the non-core (medical, schools, protection force, etc.) makes eminent sense. The Debroy committee also recommends a revised governance structure that is empowered to make decisions and create some distance from the government.

I would add one significant reform idea on railway pricing, and that is to sell passenger tickets at market prices while offering a fare subsidy to deserving passengers through a direct benefit transfer (DBT) system, akin to the cooking gas subsidy. This will permit a normalization of passenger fares for most travellers and an end to internal cross-subsidization by (ever increasing) freight prices. This passenger fare increase and other revenue enhancement measures, such as the utilization of IR’s assets (mobile and immobile) in a properly planned manner for advertisements and retail shops (including moving out ticketing from stations), will bring in much-needed resources for the engineering and safety upgradations required.

These include new signal systems, completion of the broad-gauging and electrification of tracks, dedicated sealed corridors for certain lines, and upgraded coaches and services. As a provider of logistics services for passengers and freight, IR needs a more imaginative supply chain plan for both inputs and output. Airports have done a great job of satisfying consumer demand by creating retail as well as food and beverage establishments; there is no reason why some stations cannot aspire to be retail destinations in themselves.

IR suffers less from a flow of new ideas and more from failures to get them implemented. Prime Minister Narendra Modi’s government can use an impressive parliamentary majority to finally put India’s much-needed railway reforms on track.

P.S.: “When I let go of what I am, I become what I might be,” said the Chinese philosopher Lao Tzu.

Narayan Ramachandran is chairman, Inklude Labs. Read Narayan’s Mint columns at www.livemint.com/avisiblehand