The Bibek Debroy committee on the proposed restructuring of Indian Railways has recommended private sector participation in projects and setting up an Independent Regulator to promote competition in the segment. The Final Report of the Panel has not yet been submitted, but is ready as on date; says one of the Panel member.
New Delhi: The Members of Railway Board seems uncomfortable with the Bibek Debroy committee’s recommendations and failed to even give its comments on the interim report submitted by the Panel, till date. The committee has finalized its report and is likely to submit it to the Board on Friday after incorporating comments and suggestions from Experts, various Commerce and Industry Bodies, Passengers, and Railways Unions.
“We got comments from across the spectrum. But it was amazing that the board failed to comment,” said a Panel member.
Pushed by Prime Minister Narendra Modi, the high-level committee was formed in September headed by Bibek Debroy to restructure the Railways and suggest ways for resource mobilisation. After the receipt of the final report, the Railway Board is to submit a report on it to the Prime Minister by June-end.
The other seven members of the Bibek Debroy panel include former Cabinet Secretary K.M.Chandrasekhar; former Managing Director of National Stock Exchange Ravi Narain; former CMD of Proctor and Gamble Gurcharan Das; former Railways Financial Commissioner R Kashyap and a Senior fellow at Centre for Policy Research Partha Mukhopadhyay. The panel said that if all its recommendations highlighted for the first five years – creation of a Independent Regulator, reorganisation of the Railway Board, Reorganisation of Group A Railway Services, revision of Dividend Policy and many others – are implemented and issues related to social costs are addressed within the timelines, and the annual railway budget could be phased out. The Gross Budgetary Support (GBS) to IR could be mentioned as a paragraph in the Union Budget and no more, and make room for more players in an “open access” regime which turns the Railways into just another train-service provider in the country. Instead of an aggressive approach as was seen in the interim report submitted in March for comments, the final report, to be presented to Railway Ministry on Friday, calls for more gradual changes.
The members are miffed with the board for it failed to cooperate on meeting government deadline for submitting the final report. The Centre is keen on launching reforms in the national transporter’s functioning as part of its strategy to revive economic growth. “We’re ready with the report. But senior board officials want its submission delayed. They were trying to delay the submission till June-end,” another committee member told.
The final report makes the existence of an independent, quasi-judicial Railway Regulatory Authority of India a prerequisite in five years for reforms like un-bundling and restructuring of Railways.The Rail Budget as we know it, should cease to exist after that, it says.
The report envisages the creation of a Railway Ministry eventually with at least three Secretary-level officers (“not attached with the Railway Board”) to lay down policy for the rail sector, not just of Railways alone that “should ensure competition…encourage private entry and private investments.”
The Regulator will work under the policy framed by the Ministry, while the present Railway Board will become a board of Indian Railways — the government-run operator — alone. The Board itself might be pruned to having only five secretary-level officers from the present seven.
It will be up to the Regulator to decide technical standards, set freight rates and resolve disputes. The Regulator can recommend fare revisions but these will not be binding on the Railway Ministry, it says, leaving scope, presumably, for the political dispensation of the day to take a call.
The first five years will see preparatory work: migration to a commercial accounting system (to figure out the social cost burden) in two years; uniform induction system of all new Human Resource; and devolution of powers to General Managers, Divisional Railway Managers and Station Managers.
In the new report, the committee has left the job of figuring out how to do that to the Minister of Railways under supervision of the PMO and aided by a dedicated group of officers. There is room for allowing outside experts to help in this too. Separation of railway track construction, train operations, and rolling-stock production units under different entities to enable open access can happen only after that, it says.
The Dedicated Freight Corridor Corporation Limited (DFCCL), the report recommends, should be made autonomous and separated from Indian Railways so that it gives non-discriminatory access to both Indian Railways and private operators. Operators should be able to pay directly to DFCCL without having to interact with Railways. As the tone of the interim report on the subject of private entry was criticised by unions and the bureaucracy, the final report is more cautious. “It needs to be understood that this Committee does not recommend privatization of Indian Railways,” it says, adding, “It does, however endorse private entry… with the proviso of an Independent Regulator. This Committee prefers use of the word liberalization and not privatization or deregulation, as both the latter are apt to misinterpretation.”
The panel has suggested a drastic revamp of the Railway Board that could lead to decentralization of powers, which has made board officials jittery. It also gave a firm timeframe to achieve the recommendations, which are divided into one span of five years and another of more than five years. In the first five years, it suggested major initiatives like reorganisation of the Railway Board, creation of an independent regulator, reorganisation of Group ‘A’ railway services, revision of dividend policy, etc. For the next five years, it envisages a scenario where IR has six production units, each headed by a GM, all production units are placed under a government Special Purpose Vehicle (SPV), whose directors are chosen through the Public Enterprises Selection Board, coaches and locomotives are produced in the private sector and the independent regulator resolves access to track issues for not only private train operators but also for IR zones, which competes with each other.
The panel said its recommendations had three pillars – commercial accounting, changes in human resource (HR) policy and the independent regulator. The regulator will have quasi-judicial powers, with the functions of rate and safety regulation, fair access regulation, service standard regulation and licensing, and setting technical standards. As per the recommendations, the Ministry of Railways would formulate broad policy guidelines. The zones and divisions have to become independent business centres and are wholly responsible to make the Divisions/Zones as profit centres of Indian Railways. The panel identified the scope of stiff competition among the Divisions/Zones for declaring profits. The Railway Board will establish a benchmarking practice for identifying such Divisions/Zones which are making outstanding contribution towards making Indian Railways as the profit-centre and large scale incentives are recommended for such Divisions/Zones competing with each other. However the benchmark will not be taken into consideration for annual appraisals (ACRs) of individual staff/officers. The performance of a Division/Zone is reviewed on the overall contribution in achieving the targets, performance, customer satisfaction, social security upgradation and practices for safety of passengers and railway assets, related achievements, intelligent vigilance performance, improvements in services, financial austerity measures (which includes avoidance of leakage of revenues in the name of useless expenses in various departments by different individual staff(s) etc.), customer complaints and redressal mechanism etc among the Divisions/Zones.
The panel suggests that the board will have little to do with day-to-day operations and can function as a Corporate Board. The Head of the Zone (General Manager) must be fully empowered to take all decisions without referring them to the Board. The Railway Board should function like a Corporate Board for the entire Indian Railways. The Chairman, Railway Board (CRB) should act like a Chief Executive Officer (CEO) of a large Company and is responsible for ensuring the Indian Railways necessarily run in profits and not loss making. He/She is not first among equals and should have powers of final decision-making and veto (in case of a divided view).
The suggested composition of the revamped board would include Member (Traction & Rolling Stock), Member (Passenger & Freight Business), Member (HR & Stores), Member (Finance & PPP), Member (Infrastructure) and two outside and independent experts. It said Member (Finance & PPP) and Member (HR & Stores) needn’t necessarily be from within the railway system. Lateral induction from outside shouldn’t be ruled out.
“It needs to be understood that this committee does not recommend privatisation of IR,” the panel clarified. “It does, however, endorse private entry, with the provision of an Independent Regulator for Indian Railways,” officials said, the committee had said in its final report.
One basic change between the interim and final report of the committee, officials said, is on the powers of zonal railway General Managers and Divisional Railway Managers to choose the Railway Protection Force (RPF) and Railway Protection Special Force (RPSF). In both cases, the interim report had said this should be separated from the core function of IR, which is to run trains. However, in the final report, officials say the committee said the entire cost of the GRP should be borne by the state government concerned. Else, GMs and DRMs should be given adequate freedom to choose between private security agencies and RPF for security on the trains.
Similarly, in the case of railway schools, the Committee suggested educational needs be met through subsidising their education in alternative schools, including Kendriya Vidyalayas and private schools, rather than hiring educationists on the rolls of IR.
For medical services, an official said the committee suggets GMs and DRMs and even other employees get the option of choosing either services offered through the Indian Railway Medical Services (IRMS) or privately empanelled practitioners.
“For preventive and curative health care of employees, the choice might be extended to the CGHS (Central Govt Health Scheme) framework and subsidised health care in private hospitals, which should not be restricted to referral services,” the official said.
The committee also recommended expanding the powers of Station Managers, also known as Station Superintendents, and not limiting these to commercial powers.
It also recommended bringing all the zonal construction organisations under the umbrella of one or more public sector units in the railways.
“The VII pay commission in 2016 would further push up the staff costs and pension costs, which will have serious financial implications on the Indian Railways. Thus, there is an urgent need to rationalise the manpower,” the committee has said. Also, to ensure IR appropriates more money to the Depreciation Reserve Fund, the Committee has recommended a review of the Dividend Policy and provides it a GBS net of the dividend payment.
Officials said the Debroy panel has also called for separation of social objectives and their costs – Rs 25,000 crore annually – for IR from commercial considerations. The committee also asked for adopting the Kakodkar committee’s recommendations to improve safety.
IR, it says, must also tap into extra-budgetary sources of funding such as multilateral funding agencies. And, change its investment strategy through ring-fenced investments in high-yield projects. Also, more remunerative activities like station development must be separated as SPVs involving the states.