The Union Cabinet has approved a major reform in Indian Railways, by allowing the formation of an independent railway regulator called Rail Development Authority (RDA).
It has been hailed as the having the potential to change the Indian Railways landscape. Let us go through what could be some of its functions and how it will enable development of Indian Railways.
Composition of Rail Development Authority
- It will be set up with an initial corpus of Rs 50 crore to act within the parameters of the Railway Act, 1989.
- The RDA will have a chairman and three members with a fixed term of five years each. They can be removed by the Central government only on certain grounds, including insolvency, conviction, and misbehaviour, physical and mental incapability.
- It will be an independent body with a separate budget. The independence is ensured through provision of a separate budget, and the appointment and removal process.
- The Central government will appoint the chairman and members by choosing from a panel of names recommended by the search and selection committee consisting of cabinet secretary as chairman, chairman railway board, secretary of the Department of personnel and training and chairman of any regulatory body of the Central government nominated by the cabinet secretary.
Functions of the RDA
The long-awaited regulator will perform four primary functions—
- Dissemination of information: It will collect, analyse and disseminate information and statistics concerning the rail sector and help the railways employ big data technology to manage and improve the operational efficiency of Indian Railways and complaint management.
- Tariff determination:
- The regulator will frame principles, recommend tariffs, principles for classification of commodities, frame principles for social service obligation and guidelines for track access charges on dedicated freight corridors.
- They will be only recommendatory; the final decision will be with the ministry.
- Ensuring fair play:
- The regulatory body will ensure a level-playing field for all stakeholders.
- It will help propose modifications and send suggestions or advisory notes on investment in railways by the Indian Railways, make suggestions regarding policies for private investment to ensure reasonable safeguards to PPP investors and to resolve disputes regarding future concession agreements.
- It rightly addresses the criticism that The Railway Board has been biased.
- Setting standards: It will help set efficiency and performance standards, and disseminate information in line with global best practices and benchmarking.
Background and Analysis of the move
- The need for a regulator has been emphasised by various committees, including the
- Bibek Debroy Committee on Mobilisation of Resources for Major Railway Projects and Restructuring of Railway Ministry in 2015,
- the National Transport Development Policy Committee (NTDPC) in 2014 and
- Expert Group under the Chairmanship of Dr Rakesh Mohan in 2001.
- In Railway Budget 2015-16, minister for railways Suresh Prabhu had announced that for the purpose of orderly development of infrastructure enabling competition and protection of customer interest, it is important to have a regulation mechanism independent of the service provider. Further, it was proposed to set up a mechanism for making regulations, setting performance standards and determining tariff.
- In Budget 2017, the NDA allotted a record 1.3 trillion for the Indian Railways, with gross budgetary support of Rs 55,000 crore.
- Until now, reforms in Indian Railways like the increase in train tariffs and reduction in the number of railway employees have been withheld due to political reasons. This is a commendable move as the RDA will not have political considerations.
- The move will improve the services offered to passengers, provide comfort to investors in the rail sector and will enhance transparency and accountability.
Bibek Debroy Committee focussed on the mobilisation of resources for major railway projects and restructuring of Railway Ministry and Railway Board.
- Bringing private sector participation
- Need for independent regulator
The Committee has observed that apart from its core function of running trains, Railways also engages in peripheral activities such as running schools, hospitals and a police force. It is expected that these various zones and divisions within the Railways will face increasing competition in the future. To enable themselves to compete effectively, they will need to reduce costs on these non-core activities that are non-remunerative in nature and instead improve the efficiency of running trains by greater resource allocation to this function. Non-core activities can be outsourced to private entities. An example cited by the Committee is that of subsidisation of education and medical facilities in alternative schools and hospitals respectively, including the private institutions.
- As part of the radical rethinking on improving the transportation architecture, the government did away with the separate railway budget, merging it in the Union budget.
- Now the regulatory authority, together they will change the landscape of Indian Railways as it will help the national carrier take decisions on pricing of services commensurate with costs, protect consumer interests, suggest measures for enhancement of non-fare revenue, promote competition and encourage market development, create positive environment for investment, promote efficient resource allocation and benchmarking of service standards, and suggest measures for absorption of new technologies and human resource development, if the regulatory body is allowed to work without political considerations and its recommendations are largely accepted by the political executive.