Tag Archives: Rail Tariff Authority

Indian Railways: Silent steps to reform

A friend once told me, if you wish to break a wall, there are two ways to it. Take a bulldozer and crush it in one go. If you can’t afford a bulldozer, buy a small hammer and start hitting on the cement that joins the bricks. One day the wall will fall by a mere push.

By analogy, Indian Railways seems to be hammering its way on the path to reform since it can’t bulldoze due to political compulsions. It is soon expected that train tickets could be expensive by few rupees at the physical counters much like the air tickets. And this development is not just about the expansion of internet and e-commerce but is also indicative of a larger silent process of reform that is underway in Indian Railways.

A variety of expert committees including the White Paper on Indian Railways have suggested a thorough reform of Indian Railways-especially that of the Railway Board. Key recommendations from across committees have been asking for diluting powers of the Railway Board, corporatizing the Railways under the Company’s Act like China, setting up a tariff board for rationalizing freight and passenger fares. But the fundamental question of ‘how’ remains to be answered.

But one can’t expect a revolution. Some Railway Minister will stand up to ‘revolutionise’ the functioning of the ministry and the Cabinet will oblige him. Political compulsions have rallied against reform in Indian Railways and will continue to do so. There is no rational for justifying the separate Rail budget other than the fact that we are following a British convention. The colonial power laid special emphasis on the Railway and network expansion for tapping the resources of the country. And like many others, the tradition has persisted without questions.

The tradition has been exploited for political advantages-Announcing unfeasible projects in home state of the Railway Minister, without checking on the fund reserve laying ambitious plans for new lines and trains. And the result is that Indian Railways currently has a backlog of projects over Rs one lakh crore.

But the silver lining is that there is a silent bureaucracy at work that is pushing step by step reform of the country’s largest employer. Passenger fare hike has moved out the Rail budget, making the procedure more rational and immune from electoral populism. The introduction of fuel adjustment component that would hedge the fuel price hike with freight rate was for the first time applied for passenger fares, though Railways is still absorbing majority of the losses on passenger side.

Premium trains introduced this year whose fares start with base tatkal fare and move along the demand curve is another reform step that boldly attempts to serve the demand and is not shy to earn few extra bucks, quite contrary to Railways traditional thinking of ‘social responsibility’.

And soon Railway ticketing would move largely online and special cess would be introduced at the physical counters and that is an indirect way of increasing fares. And all of this happened when the Railways had no uniform political leadership for four years. The Ministry had six Railway Ministers in the span of six years, indicative of the bureaucracy that is pushing the reforms.

But the resistance is not unfound. After much tiff between the Planning Commission and Indian Railways, the proposal of Plan Com found its way and the Rail Tariff Authority, pending an amendment in the Railways Act, 1989- will be a regulatory one armed with full powers to decide freight and passenger fares. An interim advisory body should be constituted by the year end.

Recently, a high level committee under Rakesh Mohan suggested that without the development of Indian Railways the required to boost to manufacturing sector and economy is impossible. Various experts have forecasted that the next big revolution is waiting to happen in the Indian Railways. And it wouldn’t be an Arab Spring but rather an tiring bureaucratic process full of resistance and drudgery.

Business standard

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Posted by on April 7, 2014 in Uncategorized


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Railways’ losses likely to touch Rs 25,000 crore

Loss incurred by the railways in the passenger segment is likely to touch Rs 25,000 crore this year, Rajya Sabha was informed on Friday.

Freight revenue was being used to cross subsidise passenger train fares, minister of state for railways Kotla Jaya Surya Prakash Reddy said in written a response.

A plan to constitute a Rail Tariff Authority to evolve and implement an integrated and transparent pricing mechanism for railway passenger and freight services is under consideration, he said.


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Posted by on April 4, 2014 in Uncategorized


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CII says focus on modernising railway projects welcome

The Confederation of Indian Industry (CII) has called for revamping and restructuring of the Indian Railways by developing a sustainable financial model to ensure feasibility of projects.

“Revamping of the Railway tariff, allowing FDI in railways and encouraging Joint Ventures and PPPs must be explored to access funds. This will infuse the necessary momentum to rail infrastructure upgradation,” said Chandrajit Banerjee, Director General, CII.

Banerjee welcomed the Government’s emphasis on bringing investment into the Indian Railways through FDI and PPP projects.

CII has been calling for higher investments in rail infrastructure which may be achieved by faster implementation of key railway projects, such as the Dedicated Freight Corridor, high-speed rail corridors, procurement of rolling stock and other capacity enhancement works.

Also there is a need to establish clearly defined policies and developing model documents for PPP development, ensuring transparency about the methodology and thought process behind various policy and operational issues that impact private investments.

Streamlined and time-bound approvals for all projects by setting up a dedicated cell with a single window policy will help in expediting the implementation of projects.

“CII calls for the creation of a formal consultative mechanism between industry and Indian Railways for regular interaction to take up matters related to policy and strategy,” said Banerjee.

“The honorable minister’s statement, in the interim budget, to focus on continuing investment in important projects is a very encouraging move,” said Tilakraj Seth, Executive Vice President (Infrastructure and cities, sector cluster lead, South Asia), Siemens Ltd. and Vice Chairman, CII Rail Transportation and Equipment Division.

“While this is an interim budget (vote on account) Ministry of Railways should focus on speedy project implementation and address structured measures in the next regular budget. The message in the interim budget on enhancing Rail network to include unconnected regions is welcome as it will enhance Rail revenue share,” he added.

Commenting on interim Rail Budget 2014-15, Ramesh Maheshwari, Executive Vice Chairman, Texmaco Rail and Engineering Ltd. and Past President, CII said: “It bears special mention that despite the budgetary approval of the Parliament in place, no orders for wagons have been placed on the Industry for 2 successive years – 2012-13 and 2013-14. As a result, the Industry is starved of workload and struggling for survival.”

Umesh Chowdhary, Vice Chairman and Managing Director, Titagarh Wagons Limited and member, CII Rail Transportation and Equipment Division, said: “The budget was more like a recap of the Railways’ performance over the current plan period. However, a few positives from the Hon’ble Minister’s speech were that he emphasized the importance of the Railways as the essential feature for national development and a sector which needs substantial attention and investments.”

“The minister has also emphasized upon moving forward with certain critical policies and projects such as FDI in Railways, completion of the DFC to free up existing track capacity, introduction of a freight regulator etc. All of these are extremely positive and essential for the future of the Railways,” Chowdhary added.

“Overall, I would feel that the budget has been pretty much on expected lines and all expectation and eyes would be towards the maiden Railway Budget of the next Railway Minister in a few months,” said Chowdhary.

“CII welcomes the move to engage with all the stakeholders for fixing of fares and freight by the Independent Rail Tariff Authority,” said Banerjee. (ANI)

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Posted by on February 13, 2014 in Uncategorized


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Railways opens doors to outsider to head tariff authority

The Indian Railways is perhaps one of the last bastions where non-Railway service officers were not able to occupy top posts.
However, this is now set to change.

The Chairperson of the Rail Tariff Authority, which is slated to regulate Indian Railways, can now be from a non-Railway background, according to the new eligibility norms.

This is a departure from the present state of affairs. For instance, the Railway Board has seven Secretary-level positions, including that of the Chairman, all of which are occupied by officials from different Railway services.

New eligibility norms

The new eligibility norms also ensure the presence of two officials from the Railway service background in a regulatory body, which can have up to five members, including the Chairperson.

Here is the operative part of the norms for the Chairman’s post: “….a person shall not be appointed unless he has held the post of Secretary to the Government of India or any equivalent post.”

This makes the race for these posts — applications for which have just been invited — interesting.

The Chairperson and members are assured of a five-year tenure, until they attain the age of 65 years. The retirement age for Secretary-rank posts of all ministries, including the Railway Board, is 60 years.

External pressure
While some officials see this as Railways bowing to external pressure to “hand over” a Secretary-rank post to non-Railway cadre, many other Railway officials say it is a good move as an outsider can bring in a fresh perspective to the functioning of Indian Railways.

Neutral perspective
“It is important for an outsider to be exposed to the processes and operations of this large organisation. Moreover, the views taken by a non-Railway person are likely to be seen in a more neutral perspective,” said a senior Railway official.

“Indian Railways is an asset-based organisation and requires funds to operate — not just for the creation of new assets such as trains, wagons, stations and rail tracks — but also for maintenance of the assets.

Hopefully, the regulator will take a holistic view on the state of the Railways. To that extent, it is good to have officials from non-Railway service,” said a source.

Business line

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Posted by on February 8, 2014 in Uncategorized


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Regulating Railways

Given how the losses on passenger services has risen from Rs 4,955 crore in FY02 to R24,600 crore in FY13, the idea of putting in a railways regulator was long overdue. With around 40-45% of passenger costs not getting recovered, this was cross-subsidised by keeping freight rates high—in FY07, around 43% of profits on freight were enough to take care of passenger subsidies; by FY11, this rose to 102%. As a result, India’s passenger tariffs are around a third of China’s while its freight rates are around 70% higher. Since this makes industry uncompetitive, over a period of time, the railways share of freight is falling, leaving less to even subsidise passenger tariffs anymore.

Which is why the Cabinet has done well to give the proposed Rail Tariff Authority some teeth and saying that the Railway Board will “ordinarily accept its recommendations”, and in case there is a difference of opinion, this will once again be sent back to the RTA. The problem, however, is that this needs to be legislated since, under the Railway Act, the Board is the only authority that can set rates. So, there can be some more slips between the cup and the lip.

The Financial Express.

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Posted by on January 22, 2014 in Uncategorized


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Rail tariff authority proposal sent back to Cabinet

The Ministry of Railways has sent back the proposal of setting up a Rail Tariff Authority (RTA) to the Cabinet. The Cabinet was scheduled to take up the matter on Wednesday. However, it was deferred, to be considered on a later date. “The matter was deferred because the minister could not be present today due to other priorities,” said a railway official who did not want to be named.

It is expected the matter would be taken in the next meeting.

As Business Standard had reported earlier, to set up an advisory body through an executive order would require a change in the cabinet order of August 1, 2013, on RTA. The proposal was sent back to change the provisions to enable the setting up of an advisory body.

Railway Board Chairman Arunendra Kumar has been repeatedly asserting that the RTA would be a ‘strong’ advisory body that would be set up through an executive order. But the August 2013 Cabinet order had provisions of setting up an RTA that would be ‘regulatory’ in nature.

Earlier, in a letter to the law ministry, the railway ministry had said that the Cabinet had approved setting up an RTA with full powers to fix and notify rates along with a draft amendment Bill seeking changes in the Railways Act, 1989.

The Planning Commission had been pushing for an RTA vested with full powers to “notify and fix tariffs”, according to senior officials at the Planning Commission. However, the railway ministry wanted to retain its power to take a last call on fixing tariffs and limit the role of RTA as an advisory body. After a round of consultation with the law ministry, the proposal was sent back to the Cabinet for change in the Cabinet order.

The Cabinet is likely to consider the proposal earlier this week.

Business standard

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Posted by on January 16, 2014 in Uncategorized


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Interim Rail Tariff Authority set to be formed

The “stopgap” arrangement for a Rail Tariff Authority (RTA) through an executive order is likely to be passed after consideration by the Cabinet on Wednesday and will pave the way for the country’s first pricing regulator for the rail sector. The renewed Cabinet proposal, which went out of the Railway Ministry, describes the RTA as a five-member body with the power to carry out tariff-setting exercise but not to be binding on railways to accept its recommendations — for now. Sources said that after consultations, law and railway ministries have come to the understanding that the new government, post-elections, will initiate the process of making RTA a mandatory body by amending the Railway Act, 1989 to insert a sub-section called Chapter 5 (A). This is because as per the existing law, only the Railway Board, and not any outside body, can fix tariff for railways.

The amendment will legalise the mandatory powers of the RTA. For now, a new RTA through executive order will start functioning after the selection of members. Anyone with expertise in finance and tariff-setting exercise can be eligible. Two members will be retired officials from railways with the rank of Additional Secretary or above and the others will be from other relevant fields of finance and the like. The RTA proposal was returned by the Cabinet in October after one member described the proposal as draconian because of a clause that gave Railways the option to disagree with the RTA. Railways was then asked to consult the law ministry to fine-tune the proposal and create a final draft. Then Law Minister Kapil Sibal and Railway Minister Mallikarjun Kharge had held a meeting after that apart from official-level meetings. –

Indian Express.

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Posted by on January 15, 2014 in Uncategorized


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