Rail Tariff Authority on Cabinet table this month

The next big move for financial reform in the railways, the formation of the Rail Tariff Authority (RTA), is likely to be ready for the appraisal of the Cabinet by the second week of April.

Proposed have five members chaired by a retired RBI deputy governor or retired chairman of a PSU bank, the authority will also have retired railway officials like the rank of financial commissioner at the Railway Board with a 50-50 representation of experts and former railway bureaucrats.

Railways has used guidelines followed in the formation of regulatory bodies in telecom and power sectors like Trai and CERC, respectively.

Sources said the railways has argued in favour of making it an “advisory” body, rather than one vested with mandatory, regulatory powers. Making it a mandatory body would require a separate law, which could take another year, going by the backlog of Bills in Parliament, railway officials have cited in internal deliberations. An advisory body can be floated under the existing Railway Act.

Moreover, the railways has reasoned that setting of tariff (fares and freight) cannot be a purely technical exercise since Indian Railways has a social obligation as well. “Even if it is just a recommendatory body, the whole technical exercise and the rigour of data crunching preceding its recommendation to the ministry would be hard to ignore by railway ministers while deciding the tariffs,” said a senior Railway Board official.

Mandated with “fixation of rates for transportation services”, the authority will deliberate on data furnished by the railways regularly, either once a year or on a six monthly basis, before firming up its recommendations.

For the consideration of the Cabinet, however, the option of making it a mandatory body has also been furnished although sources said the Railway Ministry did not appear to have thrown its weight behind that option.

Those in the government — including in the Planning Commission — wanting the tariff authority to be a mandatory body, argue that taking the powers of setting tariff in the railways away from the whims of future political dispensations would insulate the transporter from rising fuel bills and mounting cross subsidy from freight to passenger services.

The idea of the authority was first mooted in 2011 during the tenure of former railway minister Dinesh Trivedi who announced it in his rail budget speech of 2012-13. While his successor Mukul Roy had put this in cold storage, it gained momentum after the Trinamool Congress’s exit from the UPA government. Railway Minister Pawan Kumar Bansal again announced the setting up of the authority in his rail budget speech this year and sent it for inter-ministerial consultation.

The railway ministry is aiming to review its fares and freight again in October. If formed by then, the tariff authority could preside over that exercise.