Moving India to 2032: Can Indian Railways make the leap as a logistics provider?

India last took a serious look at transport policy in 1980, when a National Transport Policy Committee, under the chairmanship of the late B D Pande, a former Cabinet Secretary, submitted its report. Thirty four years later, the National Transport Development Policy Committee, chaired by Rakesh Mohan, submitted its comprehensive report titled ‘India Transport Report: Moving India To 2032’ in February, 2014.

Mohan is clearly recognised as one of the foremost thinkers in India’s infrastructure domain. He chaired the Expert Group on Commercialisation of Infrastructure, which issued the famous India Infrastructure Report in 1997. He also steered the Expert Group on Railways that issued the Indian Railways Report in 2002. This latest report is clearly an outstanding presentation of strategic thinking for the transportation sector – covering railways, roads, civil aviation, ports, urban transport and a special section on connectivity for the north-east.

But it is the revitalisation of Indian Railways that emerges as the first cornerstone of the strategy. Bemoaning the massive haemorrhaging of passenger and freight market shares over the last 60 years, it proposes a “massive capacity expansion of the railways for both freight and passenger traffic in a manner that has not taken place since Independence”. Backing this bold recommendation is the allied imperative to increase investment in railways from 0.4 per cent of gross domestic product in the 11th Plan to 0.8 per cent in the 12th Plan, and then rising to 1.1-1.2 per cent in the 13th Plan and beyond. Luckily, in political economy terms, this call for prioritising rail comes at a propitious time with the new government going all out to promote high-speed rail links.

Plg Comm reportIt would be commonly understood that a strategy that directs and prioritises public expenditure in a particular direction must necessarily entail a relative reduction of the same in one or more sectors. Thus, while there is no disagreement with the massive step-up in outlays on railways, one would have expected a downplaying of public expenditure in roads and a burst of fresh thinking on galvanising private capital for national and state roads. However, the report stops short of any bold suggestions and lives with an acceptance of the fact that “private sector financing may be of the order of 10-15 per cent as only part of the road network can be taken up on PPP (public-private partnership) basis…. and, therefore, it would be prudent to enhance the availability of public sector funding”. This is somewhat baffling as the table shows that private capital in roads was already at a level of 20 per cent in the 11th Plan; up from 8.5 per cent in the 10th Plan.

The report recognises that a pure step-up in outlays for rail will be completely infructuous without a parallel commitment to an institutional overhaul of the entire railway system. It has thus a set of institutional reform measures that first featured in the 2002 report on railways, and not surprisingly makes a strong comeback again. It suggests that the ministry of railways should be limited to setting policies; and leave the management and operations to be carried out by a corporatised entity, the Indian Railways Corporation. A new and independent Railways Regulatory Authority should be made responsible for overall regulation, including the setting of tariffs. It further pushes for the setting up a National Railway Construction Authority (independent of the ministry, to expedite the delivery of projects), a National Board for Rail Safety, a Railway Research and Development Institute, and Academic Centres of Excellence on Railway Research.

In fact, the building of intellectual, technical and regulatory capacity in the transportation sector, and attempting to pull this whole aspect up by the bootstraps to near-global standards is clearly a second cornerstone of the report. The foundation of this new institutional edifice is clearly the suggestion for a consolidated transport ministry, so that there could be a “programmatic” approach as distinct from the hitherto “uncoordinated” and “project-oriented”, with, possibly, the exception of the National Highway Development Programme. Considered to be politically undoable for long, the National Democratic Alliance (NDA) government has just shown its preference for this direction by having both roads and ports under one minister.

The power of information technology is sought to be harnessed by having an autonomous central-level institution called the Indian Institute of Information Technology in Transportation along the lines of the Research and Innovative Technology Administration, which co-ordinates the US Department of Transportation research programmes and helps in the deployment of state-of-the-art technologies for improving US transportation.

Six other bodies that are meant to complement and populate the institutional architecture are:

  • Dedicated Metropolitan Urban Transport Authorities for each city with population in excess of one million for integrated planning, co-ordination and delivery of urban transport services.
  • A National Automobile Pollution and Fuel Authority responsible for setting and enforcing vehicle emission and fuel quality standards.
  • A new Maritime Authority for Ports, to be constituted under a modernised Indian Ports Act.
  • Safety departments within all operating agencies.
  • The Central Logistics Development Council comprising of industry members, ministry representatives, and financial and academic institutions with the mandate of promoting the logistics industry.
  • A Civil Aviation Authority replacing the existing Directorate General of Civil Aviation and Airports Economic Regulatory Authority.

The report is unambiguous in its view that sectoral governance requires the setting up of statutory regulatory agencies for each transport sector. Pricing for transport services and for associated inputs like fuels should be depoliticised and set by market or by independent regulatory authorities. Further, the imperative to bring in private capital requires an expert authority to be set up to regulate and monitor PPP projects.

The third cornerstone of the report arises from the candid acknowledgement of the historic neglect of transport infrastructure in the north-eastern part of India that has negatively affected its desired integration with mainland India and affected the development of its human and economic potential. It, therefore, directs that “special and specific” attention be paid to intra-regional, inter-regional and trans-border transport movement and connectivity. It suggests a number of measures in roads, air, rail, inland water and suggests a separate body under the ministry of development of north-eastern region to oversee the implementation of these projects. It also suggests India should develop a strategic long-term view on intensifying international transport linkages from the north-east to its neighbours such as Bhutan, Bangladesh and Myanmar.

Mohan, in his forwarding letter to the prime minister says: “To meet the needs of India in the 21st Century; radical structural change is necessary along with a new strategy for investment.”

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