Introduction: The article discusses about the need of strong regulator for Railways in order to control its mounting losses in passenger segment.
Topics:General Studies, Paper- III
- Railway’s losses in the passenger segment have gone up fivefold over the last decade which has distorted the national carrier’s functioning.
- Very low fares for suburban passengers has led to over- charging in the high end passenger segment and in the freight segment.
- Railways has lost considerable market share due to this mismatch in fares. For example:
- From a small fraction of the Railways upper class passenger business in early 2000, the number of domestic air travelers today is more than 50 times the number travelling in AC-1 and six times the number travelling on AC-2.
- In the case of freight, the Railways share has fallen to 31% today.
- This shows the need for regulator at the earliest to control mounting losses.
- Once a regulator comes in, the belief is, much of this will get fixed.
- The power to implement the decision will be with political class which might not implement due to political considerations.
- But, the decision taken by the government will be appealable in court.
- Apart from setting tariffs, an independent regulator is critical if the Railways are to invite private sector participation—without an independent arbiter, there is always the likelihood that the Railways will stifle the competition.
- The problem, however, is that with the Railways looking at bringing in a regulator through an executive order within a few months, the regulator will be quite toothless, more so since it will have to report to the Railways.
- Under the law, the power of tariff-setting only lies with the government so even if the regulator is chosen by a committee headed by the Cabinet Secretary, it cannot set any tariffs.
- The ministry is right when it says that, in any case, till the Railways adopts commercial accounting which could take two years, no regulator can do much since there will be no data to work on.
- It is also true that it will take the regulator some time to be able to finalise principles for tariff determination.
- Given this, the ministry feels that it is important to start right now, and when Parliament amends the Railways Act to allow a regulator to set tariffs, the regulator can be fully empowered.
- Given the regulator will have limited powers anyway, and that there will be no appellate authority, it is probably best to drop the half-way house and to move a Bill that gives birth to a fully empowered regulator.
- While a part of the regulator’s job is setting tariff principles or common-carrier rules for sharing infrastructure, for the process to have any legitimacy, an appeals process is critical—both users of railway services and the Railways itself have to be able to appeal an order for it to have any credibility
- The executive order process, however, does not even allow for an appeals process.
Question: Indian Railways is often called as the lifeline of the nation. But, railways is bleeding due to inefficient freight fixing. In the light of this statement, discuss about the idea of setting up of a railway regulatory board. Suggested Approach:
- In the introduction, highlight about the mounting losses of railways.
- Discuss major features of Railway regulatory board.
- Point out the shortcomings, if any.
- Suggest further practical measures.
Source:The Financial Express