Railway Corporatization: Will it improve efficiency?

There has been much talk of bringing necessary reforms in railways so as to gear up efficiency. As is well known, Indian railways is one of the biggest in the world covering almost the length and breadth of the country. It has massive infrastructure, divided into several regional set-ups. Moreover, poor people use trains to travel, not just within their State but also commute to other States due to a very reasonable fare structure.

According to latest reports, the Government is considering a proposal to set up either an umbrella company to manage all its rolling stocks, production factories or alternately two public sector enterprises, one for locomotive manufacturing and the other for coaches and wheels. Though the idea does not look bad, it has to be ensured that there is the right professionalism which can be possible by induction of young and talented engineers. Obviously, old railway officials should not find a place in these units.

Importantly, technological changes are already being inducted into the railways to ensure faster trains. It has been realized that though the railways is huge, the running of trains is one of the slowest in the world. Thus, with technology being a key input, this has to be handled by a team from the IITs and other such bodies that are sufficiently equipped.

Many believe that the authorities want to privatise rolling stock manufacturing of the railways. It is difficult to predict what will eventually happen but one is reminded of the privatization of railway public sector undertakings (PSUs) such as Burn Standard and Jessop and their pathetic results are well known. It needs to be underscored that there is lack of professionalism in the country’s private sector which just wants to cash in on land and other assets of public sector units which are put up for sale. There is rarely an example where a languishing PSU has been nurtured to health and revived by induction of technology and modernization by any private party.

In recent years, the Government has stepped up disinvestment in PSUs, like never before, clearly, to cash in on large funds to support its uncovered budget expenditure and keep the fiscal deficit low. While this might find support, it also has to be ensured that, in case there is a private party, its role should be to modernize operations and increase productivity. But unfortunately this does not happen.

According to available figures, the railway’s rolling stock consisted of 277,987 freight wagons, 70,937 coaches and 11,452 locomotives. Apart from production for captive use by the railways, the production units also export rolling stocks and components to several destinations like Bangladesh, Sri Lanka, Hungary, Myanmar, East Africa and Central and East Asian countries. With induction of new technology in wagon manufacturing and locomotives, India could make a dent in new markets.

Meanwhile, a new public sector structured company called the Indian Railway Rolling Stock Company (IRRSC), which has been formed is the holding unit of locomotives and rolling stock along the lines of China’s state-owned CRRC Group. This is part of Railway Minister Piyush Goyal’s100 day roadmap document for the national transporter. Noticeably, the objective is to use the new entity to drive technology partnership and modernization for world-standard coaches and locomotives production.

A detailed study will be conducted of seven of its production units, namely, West Bengal’s  Chittaranjan Locomotive Works (CLW) , Integral Coach Factory (ICF) in Chennai, Kapurthala’s Rail Coach Factory (RCF), Diesel Modernization Works (DMW) in Patiala, Diesel Locomotive Works (DLW) in Varanasi, Wheel & Axle Plant in Bangalore, and Modern Coach Factory (MCF) in Rae Bareli.

It is understood that under the Government’s ‘Make in India’ initiative, new concepts such as extensive use of Robotics, automation etc. are being implemented. In addition, new generation safer LHB coaches are being manufactured in the factory, contributing to the railways and passengers safety.

Besides, accusations of privatization have been vehemently denied by the Railway Minister. Recall, during Parliament’s Budget session, Goyal stated that the railways cannot be privatized. However, “if we have to increase the facilities in railways, we obviously need investments for it. We have taken a decision to encourage public-private partnerships and we will also corporatize some units”.

Undeniably, the Government is giving attention to the development of railways. A case in point is the work for a Dedicated Freight Corridor which started in 2007. True, from 2007 to 2014, not even one kilometre of track linking was done but during the last five years around 1900 kms of track linking has been completed. The participation of the Asian Development Bank and the Japan International Cooperative Agency in this as also for the high speed rail corridor has greatly helped.

Notably, the railways contribute around 2.9% of the country’s gross domestic product. Consequently, modernizing and expanding railways is essential at this juncture. Be it the running of trains or induction of modern and efficient locomotives and coaches (like production of Linke Hofmann Busch) or 100% electrification or increasing level crossings and foot bridges and modern signaling to minimize accidents or maintenance of rolling stock, all these are important. For this, foreign collaborations have been signed but more investments from partner countries are needed.

Pertinently, developing countries are heavily dependent on financial institutions as also developed countries for funding of various types of infrastructure, specially railways. The mushrooming of metro rail networks has also been carried out with foreign funding while technical expertise has been mostly indigenous.

The corporatization of the railways might be in the right direction but there should be serious thinking before going in for privatization. The private sector in India is only after profit and has no interest whatsoever in sincerely participating in railway development which is a great obligation to the country. Only units which are highly profitable like IRCTC or the vast land development of the railways might interest them.

In sum, our policy makers need to remember the economically weaker sections and lower income groups are the major beneficiaries of the railway network and hence expanding and strengthening it would greatly help the national cause. One hopes India is well poised to create its position amongst the global railway systems.



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