Jun 24, 2016

Centre to constitute Rail Regulator for transformation of Indian Railways

The government has changed the name of the Rail Tariff Authority to Rail Development Authority to give it a much larger mandate, on the lines of independent regulators in the insurance and telecom sectors. In a step preceding the government’s plan to junk separate Rail Budget, the Centre has moved to set up the Rail Development Authority (RDA), which will not only be independent of the Ministry of Railways, but will also function under the Finance Ministry!

New Delhi: The Centre is set to constitute a Rail Development Authority (RDA) that will not only recommend passenger and freight fares but also lay down a road map for the transformation of Indian Railways. The move is seen as the beginning of the clipping of the wings of the Railway Board.
The government has changed the name of the Rail Tariff Authority to Rail Development Authority to give it a much larger mandate, on the lines of independent regulators in the insurance and telecom sectors.

The RDA, sources said, is being set up on the lines of the Commissioner for Railway Safety (CRS), which is under the ministry of civil aviation. “The RDA is proposed to be set up under either ministry of finance or corporate affairs to make it independent of the railways. The body will not only function independent of political interference in recommending passenger and freight fares, but also suggest changes in policies and rules to attract private investment,” sources said.

The setting up of the RDA is being seen as a major reform in line with the Bibek Debroy Committee’s recommendations of January 4, 2015. The RDA was constituted by PM Narendra Modi. “The PM is keen to change the character of the railways, which is seen as a top-heavy bureaucratic organisation. Despite a number of reports in the last one decade, the railways thwarted all attempts to institutionalise changes. The setting up of the RDA through an executive order without going thro-ugh the rigour of getting parliamentary approval is an indication of urgency at the top level of government to go for strong reforms,” sources added.

The urgency to set up the RDA comes after Indian Railways admitted that it is bearing a loss of Rs 34,000 crore in passenger traffic, which is being cross-subsidised by higher freight fares, which, in turn, is forcing goods transporters to shift to the road sector.

“The proposed body will be a professional entity that can help tap private investment and suggest ways to run the railways with professional competency, unlike the current scenario where those from the railway cadres have monopolised its functioning,” sources added.

The RDA is being set up along with the exercise of accounting reforms underway to allow it to know exactly how much is being spent to transport a passenger or goods so that it can recommend realistic fare revisions.

The proposed body will also provide a credible way out from the current paradox of the railways being a customer for private players in public-private partnership projects and also being the arbiter when a dispute arises. The railway ministry had placed a concept note on setting up of the body in the public domain about six months ago and the feedback from a cross-section of stakeholders was examined.

Reform in line with panel recommendation

The setting up of the RDA is being seen as a major reform in line with the Bibek Debroy Committee’s recommendations of January 4, 2015. The RDA was constituted by Prime Minister. “The Prime Minister is keen to change the character of the railways, which is seen as a top-heavy bureaucratic organisation. Despite a number of reports in the last one decade, the railways thwarted all attempts to institutionalise changes. The setting up of the RDA through an executive order without going through the rigour of getting parliamentary approval is an indication of urgency at the top level of government to go for strong reforms,” sources added.

The urgency to set up the RDA comes after Indian Railways admitted that it is bearing a loss of Rs 34,000 crore in passenger traffic, which is being cross-subsidised by higher freight fares, which, in turn, is forcing goods transporters to shift to the road sector.