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Business
The challenge ahead
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The task of restructuring the Railways commences with its organisational structure. While its greatest strength is its size, the rationale behind the continuation in its present form and the costs of doing so require re-examination, says V. S. Sam bandan.
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GIVEN THE hard times that India's largest business organisation, the Indian Railways, is going through, the serious task of budget preparation is bound to have its pressures. For the Railway Minister, Nitish Kumar, it will also be a moment of test of his ability to carry forward his ideas put across in a status paper a few years ago in his previous Ministerial tenure. A look at the last two budgets clearly brings out the need to restructure the Railways if it has to survive in the decades ahead and perform its task of providing vital transportation linkages within the country. If the changes in the composition of internal resources and the deferring of dividend payments to the Union Government show the sliding financial health; the reluctance to rationalise passenger fares and the tendency to sanction new or additional lines despite the economics of such decisions bring out the political pressures on the Railway Minister.
The events of the past year involving the Railways are bound to have their bearing on the annual budgetary exercise. The change in the political leadership of the Ministry, the gruesome accident that brought out in tragic effect the consequences of ignoring safety considerations and the submission of yet another report on the restructuring of the Railways are but three defining events. The most important of the challenges ahead is to embark on the restructuring process without diluting the basic purpose of governmental mass transportation system in a developing country, with widespread disparities: to carry out social service obligations. An important feature of the Indian Railways is that unlike the other transportation systems in the country or the rail companies of Europe that were restructured, it is not a marginal player, but an important and crucial mover of people and freight.
The task of restructuring the Railways commences with its organisational structure. While its greatest strength is its size, the rationale behind the continuation in its present form and the costs of doing so require re-examination. The ability of the vertically-integrated, monolithic organisation structure to survive the coming decades will have to be studied in the face of present financial difficulties, increasing pressure from the road sector and the decreasing role of the private sector. In a way, the 1990s was a difficult decade for the Indian Railways. Not only was there a commencement of unviable projects but also at a larger level, the macro-economy of India underwent a change with the commencement of the reforms process. In addition, there has been a considerable move of freight transportation towards the road sector, which was also evident during the 1990s when the latter increased its share after its de-regulation in the 1980s. This is best illustrated by the fact that the growth rate of the `net tonne kilometres' carried by rail, which averaged 5.33 per cent between 1984 and 1991 fell to 1.86 per cent between 1992 and 1999.
The declining role of the Railways has also been precipitated by a policy that results in freight subsidising passenger fares. Taking serious note of this aspect, the Draft Approach Paper to the Tenth Plan had said, "The most alarming policy distortion is the skewed tariff policy which overcharges freight movement in order to subsidise passenger traffic. This is accompanied by an investment strategy, which has placed excessive emphasis on opening new lines for passenger traffic and not enough emphasis on expanding capacity in areas where there is potential commercial traffic. The net result has been an alarming deterioration in the financial condition of the Railways and an inability to undertake the investment needed to improve Railway transport services.''
The most difficult exercise in the years ahead for the Indian Railways will be reducing administrative expenses. The Approach Paper says that "the aim should be that staff cost, including pension, remains within the level of 45 per cent of gross traffic receipt up to the year 2010. This will imply that the staff strength will have to be reduced to around 12 lakh and maintained at that level.'' Embarking upon this sensitive task is bound to meet with resistance. The imperatives for Mr. Kumar during his budget presentation will be more than a moment under the public spotlight as he faces complex choices on how to take the Railways forward.
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