An official committee has recommended a whole set of reforms including entry of private players into railways, separation of off line activities from core business, passing on subsidies to the Centre and an end to the practice to a separate budget.
Holding that the railway finances were in a precarious situation, the committee headed by Niti Aayog member Bibek Debroy, says that there is need not only to improve the internal resource generation and explore varied methods of financing but also to improve utilisation of available resources.
The committee, a brainchild Prime Minister Narendra Modi, has in its over 300 page report, says it does not recommend privatisation of railways but railway unions have attacked the report saying it is a clear road map for privatisation which would endanger safety and increase financial burden.
"It does, however, endorse private entry, which is not ab initio but ab hinc -- as this is already part of the Indian Railway policy -- with the proviso of an independent regulator.
"This committee prefers use of the word liberalisation and not privatisation or deregulation, as both the latter are apt to misinterpretation," it said.
In a major recommendation, it has proposed separation of activities like running of hospitals, schools, catering, real estate development, manufacturing of locomotives, coaches and wagons from the core business of running trains.
State governments should be asked to entirely fund Government Railway Police (GRP) and the general managers should have the freedom to choose between private security guards and RPF for security on trains.
As a way forward beyond five years, the committee envisages three points of view that existing production units will be exposed to competition from private sector and to face competition the units may be placed under a special purpose vehicle known as Indian Railways Manufacturing Company.
"Once the changes of the first five years are implemented, including the resolution of the social cost issue, the railway budget should be phased out with gross budgetary support to Indian Railways mentioned as a paragraph in the Union Budget and no more.
The committee has strongly recommended establishment of an independent regulator -- Railway Regulatory Authority of India (RRAI) -- with a separate budget and to be independent of the ministry.
"The RRAI will have the powers and objectives of economic regulation, including wherever necessary tariff regulation, safety regulation, pair access regulation, service standard regulation, licencing and enhancing compensation and setting technical standards.
"It will possess quasi judicial powered, with appointment and removal of members, distance from ministry of railways. Issues like consumer complaints, including class action complaints, will not be addressed by RRAI," it said.
The committee said once RRAI begins to function and resolves the access to track for private train operators and Indian Railway zones, a case for bifurcation may be considered between the Indian Railways Infrastructure Corporation and rest of Indian Railways as train operators in competition with private operators.
The report also recommends leasing of parcel vans in trains through auction of carrying capacity, private parcel trains and concessioning of train services as considered viable options.
Asking the railways to look at other extra budgetary sources such as multilateral funding agencies, committee suggested changing investment strategy through ring fenced investments in high yield projects.
"It is recommended that the funds borrowed from the market should be used for capacity generation instead of assets replacement.
"In respect of development of railway stations, this committee recommends that expression of interest may be invited from potential users of land around each station and a partnership agreement worked out with selected bidders following a transparent process," it said.
The report also recommended reforms in accounting and human resources management.