Debroy Panel Report: Civil Services Mentor Magazine - July + Aug - 2015

Debroy Panel Report

India has one of the largest railway networks in the world. According to the International Union of Railways which compares the data across countries, India has the 4th largest railway network in the world. The United States has 224,792 km, China has 103,144 km, Russia has 128,000 km and India has 64,460.8. If we normalize these absolute figures by geographical area, each km of track covers 45.74 sq. km in India. This is roughly comparable to that in the United States, significantly lower than that in Germany, but much lower than the figures for Russia, China or Canada. If normalization is done by population, each km of track caters to 19,133 people in India. Close to 20000 trains are running every day in India, two-third of them are passenger trains carrying 23 million passengers. Others are freight trains which carry 3 million tonnes of freight per day. There are only 4 countries in the world that carry more than 1 billion tonnes of originating freight a year and these are China, Russia, the United States and India.

Apart from a vast network Indian Railways is also very low cost and affordable to every class of society. Indian railways have played a very important role in development and growth of some of the industries. Role of Indian Railways for industries is at all the stages from bringing raw material to sending the finished product to market. Indian railways have played an important role in development of cotton industries, jute industries and coal industries etc. Apart from industrial development Indian railways have played an important role in national integration. Vast network of Indian railways allows people to move from one place to another in the country without any hindrance. Indian railways has provided help during national calamities, IR helps in movement of police personnel as well as the necessary material supply to remote places as well.

According to Economic Survey 2015 there is a need for public investment in the Railways. Economic survey says “Railways are found to focus strong backward linkages (demand pull from other sectors) with manufacturing and services. 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’…Further, there are sectors where railway services are an input to production (forward linkages). An Rs 1 push in railway sector will increase the output of the other sectors by about Rs 2.5. This forward linkage has declined over time but this is largely endogenous to capacity constraints in the railways sector which has led to reliance on other modes of transport. Combining forward and backward linkage effects suggests a very large multiplier (over 5) of investments in the Railways.”

Indian railways have come a long way forward since the independence. Total route km has increased to 65,806 in 2013-14 from 53,596 in 1950-51. Similarly freight carried has increased from 73 million tonnes in 1950-51 to 1.052 million tonnes in 2013-14. There is a seven fold increase in the number of originating passengers. Originating passengers increased from 1,284 million in 1950-51 to 8,397 million in 2013-14. Despite substantial additions to the number of trains and passengers there are still problems with Indian Railways. They include:-

  • The speed at which freight and passenger traffic has been moving in recent years has yet to attain the pre-war level.
  • Delays in trains still continue.
  • Operating ratio of the trains is very high around 90 percent.
  • Problems related to hygiene as well as security persist.
  • Some areas are still uncovered in the Indian railways network.

In order to remove the problems in Indian railways a committee was constituted on 22.09.2014 with a tenure of one year for “Mobilization of resources for major Railway projects and Re-structuring of Railways, Ministry & Railway Board” under the chairmanship of Dr. Bibek Debroy. Committee has submitted its report on june 2015. Major recommendations of the committee include:-

  • To enable proper decision –making, the IR needs to adopt a commercial accrual-based double entry accounting system. This will help determine the precise extent of subsidization.

  • Any increase in passenger fares should be accompanied by better passenger services and amenities.

  • 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.

  • Set up a Railway Regulatory Authority of India (RRAI) statutorily, with an independent budget, so that it is truly independent of the Ministry of Railways. The RRAI to have the powers and objectives of economic regulation, including, wherever necessary, tariff regulation; safety regulation; fair access regulation, including access to railway infrastructure for private operators; service standard regulation; licensing and enhancing competition; and setting technical standards. It should possess quasijudicial powers, with appointment and removal of Members distanced from the Ministry of Railways.

  • Private entry into running both freight and passenger trains in competition with IR should be allowed and private participation in various Railway infrastructure services and non-core activities like production and construction, should be encouraged by the Ministry of Railways.

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