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On right track

THE RAILWAY ADMINISTRATION finally appears to be gearing up to face the challenges of the unprecedented resource crunch, the huge maintenance backlog, the mounting operational costs and the growing competition from the road sector. This is evident from t he series of proposals it is examining to cut costs, and better manage and commercialise its operations. The prominent among these proposals are the privatisation of the units manufacturing locomotives and coaches and the decision to buy power directly f rom the National Thermal Power Corporation.

Over the years, the Railways has made huge investments in the production of wagons, locomotives and coaches. In certain cases it was a historic necessity of the time. However, given the monolithic structure, it has not been possible to run these units on commercial lines. The Railway Ministry routinely earmarks production quotas among the various units without taking into account their competitive strengths and limitations. Selling these units to the private sector will not only generate the much-needed funds for other modernisation and development activities, but relieve the organisation of the unnecessary burden of administering them. Moreover, this will enable the Railways to procure its annual requirements running into some Rs. 9,000 crores at much more competitive rates from the open market with a much wider choice. Last year, the Asian Development Bank had sought a complete review of the procurement procedure, maintenance of locos, wagons and coaches, etc., while sanctioning the $300-million loa n to the Railways. It also wanted improvements to the costing system and a switch to the profit-centre approach. The Rakesh Mohan Committee, constituted by the Railways last year to recommend a restructuring, is expected

to make several radical suggestions, including large-scale privatisation of the Railways' peripheral activities. Also, during his interactions with the Railway Minister, Ms. Mamta Banerjee, and the Railway Board, Mr. Rakesh Mohan is believed to have sugg ested that the Railways should confine itself to the efficient operation of the network. A similar suggestion was made earlier by the K. C. Pant Committee on infrastructure, which wanted the Railways corporatised.

The other major proposal is a real eye-opener. It shows how the Railways can save huge amounts merely by adopting a more professional and cost-effective approach to its procurements. The Railways proposes to buy power directly from the NTPC instead of fr om the State electricity boards (SEBs) and has identified four to five sections where this can be done. While the SEBs charge the Railways a flat rate of Rs. 4 per kWh, the Railways could get it from the NTPC at Rs. 2.60, resulting in an estimated annua l savings of Rs. 1,000 crores. In fact, in a landmark decision, the expanded Railway Board has cleared a proposal to allow the Railways to buy power directly from the NTPC for the Raigarh-Paniagob section of the South-Eastern Railways; this will save the Railways Rs. 120.30 crores annually. The Railways has announced plans to access more from the 15 per cent unallocated Central share of power. Moreover, as per the Railway Budget, there is a proposal to sign exclusive power purchase agreements (PPAs) wit h public and private companies, provided the tariff is more attractive.

There are also a number of other proposals to raise additional resources, such as the commercial utilisation of surplus land lying idle with the Railways, selling advertisement space and leasing out surplus telecom capacity available with the network. B etter management of the assets and resources, privatisation of production and service units, scientific inventory and purchase management will help transform the Railway system. Needed is a move towards greater degree of corporatisation of the various di visions.