Aiming to end the culture of populism by delinking the fare and freight structure from political decisions, railway minister Suresh Prabhu has moved in with initiatives to set up an independent tariff and safety regulatory authority.
A decision on the setting up of the rail regulator — to determine the fare and freight structure on the basis of prevailing market conditions — will be announced this year, Prabhu told Hindustan Times.
The move — a key reform agenda of the NDA government — is directed at ending the ‘patronage raj’ perpetuated by several railway ministers in past decades at the expense of rail finances. For almost nine of the 10 years of the previous UPA rule, passenger fares had not been increased. “The situation might well have served the political interests of previous railway ministers, but finances of the public transporter have been left in a crumbling state, as a result,” a senior official said on condition of anonymity.
Losses in the passenger segment earnings last year were estimated at a whopping Rs 29,000 crore, while the rail operating ratio (paisa spent against every rupee earned) has hovered alarmingly around 92% in past years. The fare versus freight ratio of the Indian Railways is among the most distorted, with freight earnings heavily continuing to subsidise fares. “Such a situation cannot be allowed to continue. The decision to set up a regulator is a step in the right direction and in consonance with the recommendations of several expert committees including the Sam Pitroda Committee and the more recent Bibek Debroy committee”, a senior official said.
“At a juncture when a generational shift in rail operations is being planned, the existence of an independent regulator becomes even more critical”, the railway minister said.
Besides determining the fare and freight structure, the regulator will monitor efficiency and passenger safety issues, while also acting as the arbitrator in possible disputes that may arise among private investors and the railways. “The existence of a regulator — coupled with other initiatives such as accounting reforms — will help create an enabling climate for private investors,” Prabhu said.
At the initiative of Niti Aayog vice-chairman Arvind Panagariya, a draft bill to set up the rail regulator by amending the existing railways act has been prepared and is likely to be moved in the coming winter session of Parliament, sources said. The stage of inter-ministerial consultations on the issue has been completed, the sources added.