Insights into Editorial: Transmogrifying a behemoth — the Railways

Importance of Indian Railways:

Transportation is a major part of the Indian economy.

Indian Railways (IR) has the 4th longest rail network in the world. It is a network of 70,000 km and runs about 21,000 trains, carrying 23 million passengers and 3 million tonnes of freight per day.

The Indian Railways began its operations from 16 April 1853. Indian railways are the huge and wide network of connections to the entire country.

Indian railways play a major role in transportation. People mostly prefer travelling by railways and goods can be easily carried via train.

The economy from railways plays a significant role in developing country. It gives employment opportunities to a large number of people.

Small vendors and shopkeepers also get profited by selling the goods at the railway station.

Recent Developments in the railway sector:

The Indian Railways would seem going by:

1. The images of sleek bullet trains,
2. ‘Vande Bharat’ express trains,
3. Vistadome coaches and
4. ‘airport standard’ remodelled stations that usually accompany railway-related news these days,
5. The periodic reports about record-breaking capital investments,
6. Historically high originating freight loading, and, thankfully, the historically lower number of accidents.

Paradoxically, this feel-good image makeover is also accompanied by a deafening silence on crucial policy issues, especially those that concern the financial health and the future management architecture of the Indian Railways.

Precarious financial health of Indian Railways:

1. While the recent budget reflects a ‘surplus’ of ₹875 crore for the railways, the article argues that this is mainly attributable to window dressing of the financial statistics to hide the actual financial status of the railways which continues to remain in deficit.
2. The planned projects like line doubling of existing routes, the introduction of new lines and 100% electrification require huge investments and have long gestation periods.
3. Given the limited fiscal capacity of the government, these projects will need to be financed by heavy institutional/market borrowings at relatively high rates.
4. Hence the repayment of loans and interest will continue to remain a pressure on the railways at least in the near future until the new infrastructure additions start generating revenues for the railways.
5. Notably, some experts have also raised doubts over the financial viability of some of the planned infrastructural projects.
6. The Eighth Pay Commission, normally due by around 2025-26, is bound to strain finances further.

A dilemma of identity: Commercial entity or a Government department?

The Indian Railways suffers from a dilemma of identity: is it a commercial entity or a government department trying to work on commercial principles?

1. As the only “earning” department/Ministry of the Government of India that fully meets the salary, and (till recently) the pension obligations, of its serving and retired employees out of its own earnings, it has always been an outlier.
2. The pressure to project an image of a public undertaking that is financially viable is, therefore, immense. This explains the tendency to fiddle with financial statistics.
3. On the other hand, there is the recent trend that the Government is pursuing to invest heavily in projects with long gestation periods:
   1. Examples are line doubling and new lines and 100% electrification (not all of which are viable) — financed by heavy institutional/market borrowings.
4. This sends a signal that the organisation has switched to a policy of heavy investments toward capacity expansion to be in a ready state to meet future traffic needs.
5. Revenue generation, at least in the short term, will, therefore, lag the working expenses which include repayment of loans/lease charges, that are skyrocketing, with a drastic reduction in internal resource generation.
6. The Eighth Pay Commission, normally due by around 2025-26, is bound to strain finances further.
7. The Government needs to acknowledge that in the short term, the Indian Railways will have to function as a “spending department”.
8. A realistic projection of the financial position will spur concerted action to reverse the trend within a short time frame.
9. Band-aid measures such as tinkering with the financial statistics could result in transforming the Indian Railways into another basket case like the former government-owned airline, Air India.

Therefore, the investment policy needs to be spelt out clearly.

‘Silo-less’ utopia: Absence of a clear policy:

1. The absence of a clear policy is evident in another crucial area: changing the management architecture of the Indian Railways.
2. A momentous decision was made by the Union Cabinet in December 2019 to do away with the decades old system of recruiting officers to the eight organised ‘Group A’ services in the Railways and instead have recruitments to a single service called the Indian Railways Management Service (IRMS).
3. The ostensible reason for this tectonic shift was to curb the scourge of “departmentalism” that was seen to hamper optimum decision making and the smooth working of the Railways.
4. After a delay of more than two years, the formation of IRMS was officially notified on February 9, 2022, followed by the announcement of a nearly 40% reduction in the ‘Group A’ cadre strength under the IRMS.

Certain conclusions/consequences follow from the single service called the Indian Railways Management Service (IRMS):

1. First, the Indian Railways is content to recruit its managers (remember, not engineers) to manage technical functions from a cohort of engineers who have already decided to pursue a career outside engineering.
2. Second, it is most likely that the recruits will not be among the top rankers in CSE.
3. Third, these “reluctant engineers” may not become available in sufficient numbers, assuming that the Government still considers that candidates with an engineering background are required to manage technical functions within the Indian Railways.
4. Finally, with no ‘departmental silos’ and a common seniority, it is possible to visualize a situation where a recruit starts his career managing locomotives and rolling stock, then advances through middle management levels managing track, signals and communications.
   1. At senior management levels, works as financial adviser and human resources manager, ending his illustrious career at the apex level handling policy matters on operations and business development. A truly rolling stone gathering no “departmental moss”!

Conclusion:

The working of Indian Railways is caught up between making it a self-sufficient organization and serving it as a transport system for the poor.

The research and technical training establishments could be spun off as autonomous institutions.

Reforms are needed in IR to ensure that it meets the requirements of a soon-to-be $5 trillion economy. To contribute comprehensively in Indian development IR needs administrative reforms, to improve services and efficiency and engineering reforms, to improve cost and environmental effectiveness.