NITI Aayog Interim Report recommends ‘Sweeping Changes’ in Indian Railways

Bibek Debroy
Bibek Debroy, Permanent Member of NITI Aayog (National Institution for Transforming India Aayog)

New Delhi: The Interim Report on Indian Railways (IR) has been made public and it outlines that organisational restructuring but warns that implementing its recommendations is going to be a mammoth task.

The Interim Report (soft copy available for download at the bottom of the page) of the Committee for Mobilization of Resources for Major Railway Projects and Restructuring of Railway Ministry and Railway Board, chaired by NITI Aayog (National Institution for Transforming India Aayog, which is the replacement of India’s Planning Commission) Member Bibek Debroy, stressed on Prime Minister Narendra Modi’s ‘Make in India’ campaign and argued that investment in IR has a massive multiplier effect in the Indian economy. The Report said, “From the 2007-08 data, it appears that increasing the railway output by Rs 1 would increase output in the economy by Rs 3.3.

This large multiplier has been increasing over time, and the effect is greatest on the manufacturing sector. Investing in the IR could thus be good for ‘Make in India’.”

The Committee has recommended restructuring in a way that the government is only responsible for the Railway sector policy. This will give autonomy to IR and encourage private investment, the Report said.

It further said, “A Railway Infrastructure Company should be created as a government SPV (with a possibility of disinvesting in the future) that owns the railway infrastructure, delinked from IR.”

The Report said that private investments will come only if there is an independent umpire, a regulator, responsible for ensuring fair and open access and for setting access charges on the railtrack. “This RRAI will set tariffs in cases where there is no price discovery by the market. It will adjudicate disputes between competitors. The regulator will ensure safety at all levels in the Railway system,” it said.

The Report said, “We would suggest that the implementation ownership of this Report should vest in the Minister of Railways alone, with an appropriate reporting mechanism to the PMO. It has to be ensured that once decisions are taken at the apex level, these must be earnestly implemented without delays and within predefined targeted timelines.”

The Committee given a 7-year timeline to completely overhaul IR.

Timeline: 

Immediate – Liberalization, or the allowing of private entry; changes in the composition of the Railway Board.

0-2 years – Decentralization to zones/divisions; cleaning up finances between Union government and IR.

2 years – Reform of RPF, schools and medical services; transition to commercial accounting, reform of production and construction units.

3 years – Changes in the Railways Act and the Railway Board Act, setting up a Regulator; unified entry into the Railway services; resolution of social costs.

5 years – Bifurcation between Railway Infrastructure Corporation and rest of IR as train operators; end of the Railway Budget.

7 years – Transition of the IR that operates trains to a government-owned SPV. 

The Committee  has given various sweeping recommendations that are aimed at completely overhauling Indian Railways.

On the issue of FDI in Railways, it said that foreign money isn’t going to come in the present circumstances. ” It will come only if the Railway sector is reformed along the lines discussed in this Report and the change in incentives and structure as proposed in this Report are put in place,” the Report said.

Click Download Full ReportRailways Interim_Report.pdf

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