T C A Srinivasa-Raghavan: Aamdani athanni, kharcha ruppiah

The debate about""and around""the Indian Railways never fails to remind me of two things.

One is the Govinda film on which the title of this article is based. The other is the concept of the Ardhanareeshwar in Hindu mythology.

The meaning of the title is self-evident. And I should explain that the purpose of the Ardhanareeshwar is to symbolise a fundamental indivisibility.

The concepts, if you reflect on it, are exactly applicable to the Railways, both when its finance and when its commercial and social aspects are discussed.

But there is an important difference, which needs to be kept in view.

Where the Ardhanareeshwar is concerned, the male and the female are accorded equal respect. Sadly, for the last ten years, the commercial half of the Railways has been neglected in favour of the social aspect. That is why fares have not been raised in four years while freight rates are up 73 per cent during the same period. That is why we invest so little in the Railways.

The result is both social as well as commercial distress. The lesson is that you had better not disrespect the underlying unity for too long because that way lies trouble.

The reasons are well known, so I will not dwell on them, except to say that the sooner our spinal column is rescued from the clutch of unscrupulous politicians, the better off we all will be.

But, taking everything into account, it is unlikely that this will happen in a hurry.

Nevertheless, a certain amount of distancing of the mouse from the cheese is possible and worth attempting. Indeed, the first steps have already been taken with the decision to have private participation, as in Pipavav, and to end the monopoly of the Railways over containers.

These initiatives need to be carried forward. An ideal place to start would be the privatisation of the production units under the Railways.

A few years ago, when Mamata Bannerji was railway minister, the Asian Institute of Transport Development (AITD) had prepared a report on this. The matter was discussed for some time in the government but nothing ever came of it.

Basically, said the Report (with which I was associated), it made no sense for the Railways to practise this form of vertical integration.

These production units had been established when the country needed to develop indigenous capabilities and conserve scarce foreign exchange. Nor, at that point of time, was the private sector willing or able to make heavy investments in capital and technology.

Five production units were set up during 1950""90. These are the Chittaranjan Locomotive Works in 1950, the Integral Coach Factory at Perambur in 1955, the Diesel Locomotive Works at Varanasi in 1961, the Wheel & Axle Plant at Bangalore in 1984, and the Rail Coach Factory at Kapurthala in 1985. And now Laluji wants another wheel-and-axle plant at Chhapra in Bihar.

These units are managed as departments of the Railways, which provide the funds through the Railway Budget. They have no autonomy in decision-making, with predictable consequences. What's worse, these units are treated as punishment postings by the mainstream, which means staff motivation is low. In short, it just doesn't get any worse.

The key point of the AITD report was that the raison d'etre for setting up these units no longer existed. The industrial base in the country has acquired the capability for producing high-quality equipment.

The ancillary industry has significantly developed to produce quality products at competitive prices. The private sector, which was earlier reluctant to invest in capital-intensive industries, is now willing to do so. It has also developed managerial and entrepreneurial skills.

Indeed, if anything, the boot is on the other foot now. The Railways have not been able to make even essential investments in plant and machinery.

Thus, 49 per cent of the Integral Coach Factory's (ICF's) plant and machinery has outlived its economic life; 16 per cent of the machinery is over 40 years old. Perambur employs nearly 15,000 staff, Kapurthala employs only 7,000, though both produce the same number of coaches annually.

The same kind of thing is true of the other units set up before 1984.

Nor are sound business principles followed in pricing. The so-called "transfer price" does not include profit or even the cost of capital. It is a monumental financial mess.

These units employ around 50,000 people. That is a lot of people, but since the Railways employ nearly 1.5 million people, hiving off these units in a garage sale should not be a problem, especially because of the age profile of the workforce in these units. They will be happy to take what they get and scoot.

One can hear the nay-sayers grumbling that this will dilute the social role of the railways. That is complete nonsense. The PSUs never had any social role to play.

As to the question whether all units should be sold together, or one at a time, the answer is the latter. The youngest, the Kapurthala unit, should be sold off first, followed by the wheel-and-axle plant at Bangalore and so on till you reach Chittaranjan.

The question is often asked: who will buy them? Practically, any of the world's railway equipment manufacturer will. There is no other market (other than China's) that is growing as fast.

How much should they be sold for? The price can be determined by competitive bidding. There will be no dearth of bidders.

The main firms are from the European Union, North America, and Canada, but Asian suppliers have also started entering the market. The Japanese have the technology to compete in passenger rolling stock.

The European firms are the dominant force in the passenger coach manufacturing industry, with the Japanese having pre-eminence in the multiple units. The US is the leading manufacturer of diesel locomotives, while the Europeans are mostly geared towards the production of electric locomotives.

The time for what is called jugaad in North India is over. If India wants a sustained 8 per cent growth in GDP for 10 years, it had better fix the Railways.

If it can't, then, please let us not hear the 8 per cent number mentioned again because there is already a wagon shortage. Soon there will be a loco shortage, on top of the track shortage. We will forever be standing in the "outer".