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Rail regulator gets green light

The centre has approved setting up an independent rail regulator. The regulator which is named the Rail development authority(RDA) will be set up through an executive order. It will be based in Delhi and have an initial corpus of 50 crores. 

Rail development authority(RDA) will act under the provisions of the Railway act, 1989 and will essentially be a recommendary body. The final decision on passenger and freight fares will be taken by the ministry.

The move assumes significance at present as the government has been fixing fares mostly based on political considerations.

Its responsibilities will include:

  • Recommending tariff keeping operation cost in mind
  • Creating performance standards for railway operations
  • Frame principles of social service obligation
  • Formulating policies that ensure a level playing field for private sector participation
  • Collect, analyze and disseminate information and statistics related to rail sector

What the move aims to achieve:

  • Improve passengers comfort by enhancing the quality of services
  • Bring about transparency and accountability in railways
  • Enhance investor confidence in railways

Issues identified by the Bibek Debroy committee:

  • One of the significant reasons for failure of private sector participation in railways is that policy making, regulatory functions and operations are all vested with the ministry of railways. The committee recommended segregation of roles.
  • Current accounting system does not provide actual costs of projects, which deter private sector participation is the sector

Recommendations of Bibek Debroy committee:

The committee recommended:

  • Setting up an independent regulator, which will be a statutory body, with an independent budget
  • The regulator will not determine tariff but will monitor whether the existing tariff is market determined and competitive in nature
  • Because of the specialized and technical nature of the sector it is necessary to have an independent regulator for the rail sector
  • Accounting reforms should be taken up as currently it becomes difficult to compute cost benefit analysis for projects

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