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Opinion | The right track

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Though still in an early stage, the plan—if it gets the requisite approvals—would mark a significant reform for the Railways, which currently runs all its operations directly under the government

Indian Railways is reportedly thinking of hiving off its locomotive and coach production activities into two separate public sector units—the Indian Railway Motive Power Co. and the Indian Railway Rolling Stock Co. If approved, the plan—still at an early stage—would mark a major reform for the railways.

At present, all its operations are run directly under the government. Restructuring it could remove operational inefficiencies that creep in due to multiple activities that a vast organization like the Railways typically carries out. Freed to maximize the value on their own, the two units may be able to focus better on their core activities. If they are explicitly geared to aim for profits, like any other company, their financial performance could also improve. Besides, encouraged to bag contracts from other railway services abroad, they would have an incentive to contain costs, raise quality and invest in innovation. The end beneficiary of all this would be their owner, that is, the railways. In time, perhaps the hived off units could be privatized, or taken public. The potential to unlock value is huge. The railways is on the right path.

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