Biggest Reform: Cabinet approves setting up of Rail Development Authority

New Rail Regulator to decide on tariff, ease investment process, draw future roadmap of Indian Railways with an eye on Policy, Projects, Planning and Polity aspects.

NEW DELHI: The Cabinet on Wednesday initiated a major reform by approving the setting up of a regulator called the Rail Development Authority (RDA). Sources said the ministry of railways would issue a notification in this regard within a week and a search-and-selection committee would be convened soon.

Setting up of RDA is one of the biggest reform in the rail sector. The move of the Government will improve the services offered to passengers, provide comfort to investors in Rail sector and will enhance transparency and accountability.

The need of having a Rail Regulator has been emphasised by various Committees for past many years since 2001. This includes Expert Group under the Chairmanship of Dr. Rakesh Mohan in 2001, the National Transport Development Policy Committee (NTDPC) in 2014 and Dr. Bibek Debroy’s Committee in 2015.

In the Railway Budget 2015-16, Union Minister for Railways had announced that for the purpose of orderly development of infrastructure enabling competition and protection of customer interest, it is important to have a regulation mechanism independent of the service provider. Further, it was proposed to set up a mechanism for making regulations, setting performance standards and determining tariff.

As a demonstration of true participative governance, Ministry of Railways had prepared a Concept Paper of rail regulator named Rail Development Authority of India (RDA) in December 2015 and sought comments from all industry and passenger bodies. It was also put on Indian Railways website for comments from general public. The comments received were analyzed and subsequently Cabinet Note was finalised after inter ministerial consultation.

Cabinet’s approval of proposal of Ministry of Railways for setting up a Rail Development Authority (RDA) as an independent regulatory body in New Delhi through an Executive Order of the Central Government represents one of the biggest policy reform in Railway sector.

RDA will help Government to take appropriate decisions on pricing of services commensurate with costs, suggest measures for enhancement of non-fare revenue, protection of consumer interests, promote competition, encourage market development, create positive environment for investment, promote efficient resource allocation, benchmarking of service standards, suggest measures for absorption of new technologies and human resource development and provide framework for non-discriminatory open access to the Dedicated Freight Corridor infrastructure.

The RDA will act within the parameters of the Railway Act, 1989 and undertake the following broad functions:

  • Tariff determination – Framing principles, recommendations of tariff setting, principles for classification of commodities, framing principles for social service obligation and guidelines for track access charge.
  • Ensuring fair play and level playing field for stakeholder investment in Railways – Propose modifications and send suggestions/Advisory Notes on reference made by Ministry of Railways, make suggestions regarding policies for private investment, to ensure reasonable safeguards to PPP investors and to resolve dispute regarding future Concession Agreements.
  • Setting efficiency and performance standards.
  • Dissemination of information – Global best practices and benchmarking.

The Authority will have a Chairman and 3 Members and can engage experts from relevant areas. The Chairman and the Members of RDA will have term of five years. An initial corpus of Rs.50 (fifty) crores will be provided for setting up the organization.

The RDA will be an independent body with separate budget. The independence is ensured through separate budget, appointment and removal process. The appointment of the Chairman and Members will be done by the Central Government from the panel of names recommended by the Search and Selection Committee consisting of Cabinet Secretary as Chairman, Chairman Railway Board, Secretary, Department of Personnel & Training, and Chairman of any Regulatory Body of Central Government nominated by Cabinet Secretary.

The Chairman and Members will have tenure of five years and can be removed by the Central Government on certain grounds like insolvency, conviction, misbehaviour, physical and mental incapability etc.