Simultaneously, however, preparations will be afoot to get a specific law passed by Parliament to give RDA statutory sanction. If pragmatism has thus taken precedence over a fixation with dogmatic and bureaucratic positions, the credit for that should go to the manner in which the matter was discussed and settled through a meeting between Prime Minister Narendra Modi and Railways Minister Suresh Prabhu.
What has been decided is, of course, a compromise solution to the vexed issue that some sections within the government had raised. It was argued that the Railways Act empowers only the government to set up freight rates and passenger fares. Thus, a tariff regulatory body will only be able to make recommendations, which may or may not be accepted by the government, unless and until the Railways Act is suitably amended.
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The problem was that amending the law would be a time-consuming process and given the country's fraught politics, several years might be lost before a tariff regulatory body became functional. And yet, there was an urgent need to start the process of setting up a tariff regulatory body, particularly after deciding to merge the presentation of the Railway Budget with the general Budget from April 2017. Thus, a two-pronged approach of kicking off the process with an executive order and following it up with an amendment to the Railways Act is a welcome relief. Remember that the regulatory bodies for the capital markets and pension funds, too, were initially set up through an executive order and later given legislative sanction through the passage of laws.
The structure and scope of powers of RDA reveal the Ministry of Railways' desire to make it a far more effective organisation than how it was originally planned. The three-member body, with a chairman, will be entrusted with four specific responsibilities. One, in addition to recommending tariffs, the new regulatory body would be expected to frame the guiding principles of fixing tariffs for passengers and freight, determining classification and reclassification of commodities, offering subsidies and of laying down rules for track access charges for dedicated freight corridor networks.
Two, the new regulatory body would also ensure fair play and a level playing field for new investments that are coming into the railways under the public-private partnership route. It will be asked to monitor the various model concession agreements, modify them if necessary and resolve disputes as and when they arise over such arrangements.
The third area of responsibility is what would pose for the new regulator the most difficult challenge. It has to set efficiency and performance standards for all railway projects and services. The idea behind this is that the regulatory body cannot just be concerned with fixing passenger fares and freight rates, but should also ensure that the costs of providing such services are monitored through transparently set norms, so that the Indian Railways can offer improved services and better customer experience.
Finally, the new regulatory body would also act as the Indian Railways' data repository and help it disseminate information, a task performed by different departments at present. Since, there is no central body overlooking or coordinating these functions, it is not possible to put such information to use for policy recommendation and action. The new organisation will bridge that gap.
Clearly, expectations from the new organisation are already very high even before it has been set up. The big challenge, of course, will come from the way it fixes tariffs. The question that will come up is whether a fully empowered RDA would deny the management of the Indian Railways its rights to price its services. No producer of goods or services will like the idea of losing the independence to fix prices.
The ball, therefore, will be in RDA's court. If the new regulatory body has to remain effective and not enter into an unseemly turf battle with the Indian Railways, it must make adequate efforts to get the latter's management on board before arriving at a tariff decision. The new body must put in place a regular channel of communication and consultation so that its tariff orders secure the necessary buy-in from the Indian Railways management and their implementation does not create other problems.