Indian Railways problem is best captured by a proverb: You can’t have your cake and eat it too. Passengers want ever increasing discounts on rail fares. Having been granted their wish, they are made to indirectly pay more for their tickets through high freight rates, leading to escalating costs all
around. After years of this merry-go-round, railways suffers from chronic under-investment leading to more problems and deteriorating safety. Taking a leaf out of reforms in other sectors such as power and capital markets, a new committee to reform railways has suggested a way out: Competition. It’s well worth pursuing.
An interim report of the committee under the chairmanship of economist Bibek Debroy feels the answer to reviving railways lies in changing its institutional arrangements to end government’s monopoly. Once institutional arrangements are reworked, private players may be tempted to offer their services. The outcome of competition between many players, including the original government owned operations, can catalyse change for the better. In the current system, no one really has any incentive to change status quo. Railways dips increasingly into the exchequer to fund its needs, taking away resources that could have gone towards education and healthcare. Despite its growing appetite for government resources, it loses ground to road transport.
This logjam needs to be broken by separating ownership of rail infrastructure from its operations, feels the Debroy committee. It’s a fair point as the committee also recommends allowing new players non-discriminatory access to rail infrastructure to run trains. All of which will be supervised by an independent regulator. The key to getting all this right is making the institutional changes, without which competition will remain a pipedream. Change is impossible in the absence of pressure. That’s where competition helps.
