Can the Railway Development Authority exercise Statutory Powers or remain an Advisory Body?

If one considers a critical infrastructure sector populated by multiple service providers from the private and/or the public sector, one can see the need for a state regulator to set broad policy directions, oversee performance, regulate pricing and generally look after public interest. As things stand, the Rail Development Authority does not have statutory powers. This means it will remain an Advisory Body and can only recommend changes to the existing tariff, while the ministry will still take the final call.

NEW DELHI: The Cabinet earlier this week cleared what is perhaps the biggest reform for the Indian Railways when it approved the creation of an independent regulator – Railway Development Authority (RDA) – that will among other things determine tariffs.

Politics has often come in the way of fare hikes, and train ticket prices for long have been out of sync with other modes of transport. With the Railways losing Rs 30,000 crore a year on average in the passenger segments – which accounts for 30 percent of its revenue – setting up a regulator that can operate free of political interference was seen as a welcome step for modernisation and improving safety standards.

“The authority would be free to recommend fares and freight rates,” Railway Minister Suresh Prabhu said after the proposal was cleared.

He added the regulator would rationalise the entire fare structure and keep rationalising fare as per market demand.

But there is a catch.

As things stand, the regulator does not have statutory powers. This means it will remain an advisory body and can only recommend changes to the existing tariff. It will make its suggestions on a quarterly basis or ahead of the Budget, but the ministry will still take the final call.

A Railway Board member told that a legislation to grant the RDA regulatory powers may not be tabled in Parliament this year. However, an executive order could still be passed to allow regulator to take decisions.

The Board member said a clear process will be evolved over time.

The Railways expects the RDA to functional by August 1. It will have a chairman and three other members, who need not be from the Railways. The RDA is also allowed to consult external experts.

The proposal to set up a regulator was 16 years in the making. It was first proposed in 2001 but remained in cold storage for several years. The Railway Ministry under Dinesh Trivedi proposed setting up a tariff regulator in 2012, but no progress was made as he was forced to resign after announcing a fare hike in his Budget that year, which was later rolled back.

In 2014, the National Transport Development Policy Committee (NTDPC) Report proposed a Railway Tariff Authority with a mandate to become the overall regulator of the sector.

Railway minister Suresh Prabhu in his rail budget speech for 2015-16 had said for “orderly development of infrastructure services, enabling competition and protection of customer interest, it is important to have a regulation mechanism independent of the service provider.”

And later, the Bibek Debroy Committee report made similar recommendations to grant the body overarching functions. However, the Cabinet order earlier this week does not grant the RDA these powers.