Depoliticise tariffs

Independent regulator can help Railways

The Indian Railways has for the first time increased passenger fares by levying a politically neutral "fuel adjustment component", as was envisaged in its last Budget, thus partially removing the main hurdle in the way of revising passenger fares periodically. But it is creating troubles for itself for the future by being difficult over the creation of an independent tariff authority, whose recommended tariffs will be binding and not advisory. Rates mandated by an independent regulatory authority will be depoliticised, thereby insulating the organisation from political exigencies. They will also put a figure on the organisation's social responsibility, a convenient cover to hide non-performance. On the other hand, such a regulator will take some discretionary power out of the hands of the railway minister and his senior officials. Once tariffs are set in an impartial and scientific manner, the focus will shift on how efficiently those in charge are doing their job and if not, why not. The Cabinet has already approved this, and it should not be further delayed.

The performance of the Railways for the first five months (April to August) of the current financial year gives some clue as to where the problem lies. According to one report, there is a shortfall of Rs 4,150 crore in revenue for the period compared to budgeted levels. The new levies, both through fuel adjustment for freight and fares and through raising the busy season surcharge from 12 per cent to 15 per cent, will likely net Rs 2,350 crore for the remaining six months of the year, thus leaving an uncovered shortfall of 43 per cent. Considering the current slowdown, a revenue growth of 10.3 per cent (compared to the same period last year) is not bad, even though it is short of the targeted 14 per cent. The major component, freight revenue, has done quite well; it has gone up by the budgeted 8.8 per cent. Even passenger revenue has not done badly; it is up 13 per cent, though it is way below the budgeted 30 per cent. The new phenomenon is a one per cent fall in the number of passengers. Is it customer resistance to high fares or operational inability to meet peak demand?

The real culprit seems to be expenditure. Bonus, euphemistically called "productivity-linked", will be equivalent to the salary for an inexplicable 78 days instead of last year's 73 days, a decision for which the railway minister has actually taken credit. The total bonus bill will be Rs 1,043 crore. Dearness allowance rates have also gone up and will cost an additional Rs 1,000-1,300 crore. The Railways has been exemplary in reducing its workforce from 1.65 million in 1990-91 to 1.3 million in 2011-12. Is this continuing? In his Budget speech, the minister spoke of a 1.4 million workforce. When you have no control over staff costs, particularly the pension bill, it is imperative to use more technology to both improve operational efficiency and make do with fewer hands. Who will crack the whip - a minister or an independent regulator?