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More crucial than the funding to meet Vision 2020targets is the organisation to deliver the results. The presentmonolithic Ministry is too moribund to implement theenvisioned programmes. Unless the Railways reinventsitself, Vision 2020 will be a non-starter, says K. BALAKESARI.
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When the Railway Minister presented a White Paper on the Indian Railways (IR) in December 2009 during the winter session of the Parliament, it was heralded with sensational headlines, debunking earlier claims of a cumulative cash surplus of Rs 100,000 crore. The previous Minister predictably rubbished it as a "Black Paper".
In the ensuing din, certain substantive issues have been ignored. In fact, the White Paper 2009 (WP) is a fairly balanced report card of the performance of the Railways over the past five years and seeks to focus on important issues facing the Railways today. However, perhaps the most intriguing conclusion of the Paper is right at the end of the discussion section. Based on certain indices used to analyse the performance of commercial entities it states that: ".the best period for Indian Railways financially in the last two decades was not the past five years, but the period 1991-96". This seems to be an attempt to deflate the muchhyped financial turnaround of the past five years.
The periods considered generally coincide with the incumbencies of the Ministers concerned or Governments at the Centre, injecting a whiff of politics into an otherwise objective document. Such superficial comparisons, ignoring critical factors such as the impact of Pay Commission recommendations and state of the economy, can be misleading.
For example, 2004-2009 had to absorb the effects of the Sixth Pay Commission, which spiked the Ordinary Working Expenses (OWE) by almost 23 per cent in one year. During 1996-99, apart from the Fifth Pay Commission, there was an economic slowdown.
The Paper is rightly critical of the arbitrariness of allocations to the Depreciation Reserve Fund (DRF). Unless the appropriation to DRF is made on a rational basis, comparisons of financial performance across different periods (in fact, even year to year) can be misleading.
Also, with the increasing population of retirees (currently11 lakhs and growing) a disturbing trend is emerging. The higher provision for the pension fund is driving down appropriations to the DRF, affecting the Railways' ability to adequately fund the replacement of its growing assets.
Thus, the other underlying message is that the present staffing level of just under 14 lakhs is unsustainable to weather another Pay Commission in about 6-7 years, and needs to be brought down to 10-11 lakhs.
VISION 2020
The Vision document, tabled along with the White Paper, has received little publicity. It dreams big, as any organisational vision worth the name should. It is not intended to discuss here the details of various targets set and strategies for achieving them, but only certain broader issues of vital immediate concern.
The Vision covers the period 2010-2020 and envisages a total investment of Rs 14 lakh crore ($304 billion), or about Rs 1.4 lakh crore annually. To put in perspective, the entire budget of the Government of India in 2009-10 involved about Rs 9.5 lakh crore. But the scale of investments envisaged in Vision 2020 is quite modest when compared to what the Chinese Railways is reported to be investing in just one year (2009-10): $120 billion or about Rs 5.4 lakh crore, which is almost four times the average annual investment under Vision 2020.
About 64 per cent or Rs 9 lakh crore is sought to be mobilised through Internal Resource Generation (IRG) and extra budgetary sources (EBS) and the balance Rs 5 lakh crore as Gross Budgetary Support (GBS) from the Central Government - that is, an annual average GBS of Rs 50,000 crore. The GBS so far has not exceeded Rs 10, 000 crore. So, what is being envisaged is a quantum leap by more than five times. IRG has, so far, touched a maximum of about Rs 21,000 crore.
Vision 2020 envisages Rs 90,000 crore through IRG & EBS, to be mobilised annually. By extrapolation of current trends, a 2.2 fold increase in originating freight loading, from 833 million tonnes to 1,850 million tonnes by the end of the Vision period translates to about Rs 65,000 crore as IRG, but this will be at the end of the period; the average over the period is likely to be around Rs 30,000 crore, at best. Thus, almost Rs 60,000 crore annually, on an average, will have to be mobilised through external commercial borrowings (ECB) and Public Private Participation (PPP).
Vision 2020 thus relies heavily on the PPP route for its success. This is largely uncharted territory for the Railways.
ORGANISATIONAL CHANGE
Even more crucial than the funding for actualising the Vision is the organisation to deliver results. The present antediluvian set-up, as a monolithic, omnibus Ministry of the Central Government, is too moribund to implement the programmes envisaged in the Vision document.
Certain changes have been hinted at in Vision 2020. But the fact remains that fundamental organisational change is an issue that has been repeatedly evaded in the past.
On the other hand, unless the Indian Railways reinvents itself organisationally, Vision 2020 will be a non-starter.
It is also a fact that railway systems the world over have radically reorganised only when faced with an existential threat arising from impending financial collapse /bankruptcy and/or stiff competition or intolerably poor quality of service.
By all accounts there is no immediate financial crisis. As for competition, in the absence of intra-sector competition in core business areas to drive efficiency and quality of service, there is no internal motivation for a drastic change. And major organisational changes which, even under the best of circumstances, could be temporarily disruptive with considerable internal resistance, will have to be implemented even as the organisation needs to function smoothly to keep the wheels of the economy moving.
In effect, Vision 2020 entails simultaneously a major organisational shake-up and implementation of several mega projects, mostly through the PPP route, expanding the network by 50 per cent, all in a period of 10 years. This tectonic shift is akin to a heavy freight train having to accelerate like a space rocket.
This calls for extraordinary political will and commitment and a broad consensus across the political spectrum, a consensus that has to hold for over a decade - a tall order indeed in this era of fractious politics.
Chinese Railways, with which comparisons are often made, operates under a single-party, totalitarian regime.
It is necessary to dream big. But translation of that dream to reality involves taking difficult, unpopular decisions. The fate of the Rakesh Mohan Committee Report 2001 does not inspire much hope. Will the forthcoming Railway Budget signal a fresh beginning?
(The author is a Former Member, Staff, Railway Board.)
Courtesy- The Business Line Dated 28/01/2010
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