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NEW DELHI, May 16

THE initial resistance from Railway unions and management notwithstanding, the Railway Ministry has finally acknowledged the need for initiating radical reform measures — including hiving off more activities through corporatisation, rationalising freight tariffs to globally competitive rates, de-regulation of passenger business in high speed trains and accessing multi-lateral funds for big ticket projects — to make it a commercially viable organisation.

In a status paper tabled by the Railway Minister, Mr Nitish Kumar, in Parliament on Thursday, the Ministry has mooted creation of a separate Rolling Stock Marketing Corporation to facilitate the marketing of rolling stock abroad as an alternative to the corporatisation of the six production units.

The paper, which has virtually endorsed several important suggestions made by the Rakesh Mohan Committee, is, however, silent on the organisational restructuring of the Railway Board.

The Ministry has cited the expertise built by organisations such as RITES for consultancy, IRCON for construction, Concor for container operations, IRCTC for catering and tourism to bolster its case for hiving off more peripheral activities through corporatisation.

It has held that the distinguishing feature of these PSUS is that they have been consistently making profits since their inception.

While admitting that the Railways have indeed outpriced themselves in the freight segment (for eg the share of POL traffic in the total traffic carried by the Indian Railways has come down from close to 53 per cent in 1991-92 to 34 per cent in 2000-01), the status paper has mooted the concept of making freight rates globally competitive to aid domestic industry.

On the passenger segment, some of the issues which have been thrown open for wider debate are whether the Railways should withdraw from the suburban business and also de-regulate passenger business in high speed trains, given that such projects entail funds to the tune of Rs 20,000 to Rs 30,000 crore.

The status paper has also made it clear that it would not be sustainable to increase the reliance on market borrowings through the Indian Railway Finance Corporation.

The annual lease rental pay out worked out around Rs 2,942 crore (7.8 per cent of the Gross Traffic Receipts (RE) in 1992.

Multi-lateral funding could be a potential source for big-ticket investment projects — such as upgrading the golden quadrilateral and construction of mega bridges.

A road map for improving the financial viability of the Indian Railways could be formulated if some basic questions are answered, states the status paper.

Among these are whether there should be cross subsidisation of passenger fares by freight traffic at all and whether tariff setting should be made independent and attuned to the market.

Move to cut flab

The Indian Railways will bring down its staff strength from 1.54 million to around 1.18 lakhs by 2010, according to the Status Paper.

Staff costs account for around 50 per cent of the gross traffic receipts.

While staff costs have remained more or less constant, there has been a surge in the pensionary liabilities due to the implementation of the recommendations of the Fifth Pay Commission.

The number of pensioners have risen to around 1.3 million as against a staff strength of 1.54 million. With the result pension payout works out to around 14.6 per cent of the gross revenues as against 6.3 per cent in 1986.

The Status Paper contends that present system of pension payout is unsustainable. The burden is expected to go up even further on account of the proposed new pension plan on defined contribution for new entrants.

So the question is whether the Railways should continue to bear the liability or whether it should devolve on the exchequer.

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