India



Railway Sector Structure


Railway Industry Organization

The Ministry of Railways (MOR) oversees the Indian railway sector through the Indian Railway Board, MOR (IRB). The MOR (IRB) exercises all central government policy powers and administers, supervises, and directs the entities that provide most of the rail services. The MOR (IRB) also fulfils most industry regulatory roles, except for safety oversight and railway rates appeals.

Indian Railways (IR) is the generic term used to refer to the network of railway infrastructure and services that are delivered by 16 geographically-based Zonal Railway authorities (ZRs). Each ZR has separate responsibilities and operates its own livery. But the MOR (IRB) is fully responsible for establishing, merging, or abolishing these ZRs, and for ZR governance. The MOR (IRB) appoints ZR general managers, oversees their compliance with MOR (IRB) policies, determines staffing and remuneration policies, allocates rolling stock, fixes tariffs, approves ZR operating and capital budgets, approves certain capital expenditures above specified limits, and reallocates cash deficits or surpluses of each ZR to maintain financial balance.

Production units directly under MOR (IRB) manufacture rolling stock, which is supplied to ZRs, which are responsible for maintenance. The ZRs operate all trains within their territorial jurisdiction, including inter-Zonal trains under a system for apportioning revenue, usually collected at the originating station.

India’s railways are now governed by the 1989 Railways Act (as amended), which replaced the old Indian Railways Act of 1890, under which Government was envisaged primarily as coordinator and regulator. The railway was nationalized in 1951, and virtually the entire rail system became part of the Government of India. The 1989 Railways Act authorized government and non-government railways. Now, a few separate special-purpose railways exist as joint ventures between MOR and other entities such as the Kutch Railway Company Ltd., and the Konkan Railway Corporation Ltd., however, the ZRs still carry over 99 percent of railway traffic. The statistics below relate to IR's own network and operations.

During the 1990s, perceived failures in operational performance and a deteriorating financial situation prompted Government to appoint an independent expert group to examine IR’s situation and make recommendations. The 2001 so-called Mohan Report, named for the expert group chairman, criticized railway sector governance, corporate governance, and the IR business model. Subsequent actions by MOR (IRB) have improved business substantially, but many Mohan Report criticisms have yet to be addressed and these are discussed in Conclusions.

Rail Sector Strategy

In December 2009, the MOR (IRB) published Indian Railways, Vision 2020, a new sector strategy that embraces rapid growth and abandons the earlier idea of incremental change. The objective is to reverse the erosion of rail freight modal share, improve the quality of passenger services, and embark on the construction of dedicated freight corridors and high-speed passenger routes.

Vision 2020 includes measures that aim to improve infrastructure over the next decade to a greater order of magnitude than has been achieved in the previous six decades. Vision 2020 would expand the network by 40 percent or about 25,000 kms; increase double- and multiple-track line from 18,000 to 30,000 kms; increase train speeds on dedicated passenger lines from 110-130 km/h to 170-200 km/h; complete national gauge conversion; increase electrified routes from 14,000 to 30,000 km; complete the two main dedicated freight rail corridors; and implement at least four, 350 km/h, high-speed rail corridors using PPP structures for delivery.

Vision 2020 rejects the option of railway privatization in favor of enhancing the ‘effectiveness and accountability’ of IR through ‘necessary reforms at all levels’, particularly internal corporatization and commercialization of activities. In the strategy, PPP structures are slated for a larger role in the industry—in station development, rolling stock manufacturing, logistics hubs, fiber-optic networks using railway right-of-way, and major new infrastructure projects such as high-speed rail lines and dedicated freight corridors.

Vision 2020 estimates that two-thirds of necessary investment, or US$300 billion equivalent, would be mobilized from internal surpluses earned in projected high-growth passenger and freight markets and from PPPs; the remaining one-third would require a new government rail development fund. However, at the time of writing, traffic growth has been slowed by global economic difficulties, a PPP Policy has not yet been adopted, and Government has not yet committed to establishing the development fund. Thus, Vision 2020 remains an unfunded strategy waiting to be translated into specific projects and policies.

Purchase of Transport Services

No policy or system of explicit payments exists for loss-making passenger Public Service Obligations (PSOs) in Indian Railways, but substantial internal cross-subsidy takes place for train operations within the passenger sector, as it does between individual ZRs. Also, most of the aggregate burden of infrastructure costs falls on freight customers. Therefore, the MOR (IRB) has accepted internal cross-subsidy of passenger services and an implicit tax on freight, rather than direct subsidy, to fund passenger service obligations.

Industry Regulation

The MOR (IRB) is responsible for most aspects of railway economic regulation, as noted earlier, but the Research Design and Standards Organization (RDSO), which has legal status equal to ZRs, supplies technical advice to the MOR (IRB), and the operating ZRs and their production units, on railway infrastructure and equipment design, technology, materials, product standards, testing, and so forth.

The office of the Chief Commissioner of Railway Safety (CCRS) is responsible for all safety-related aspects of IR operations and is assisted by Commissioners of Railway Safety (CRSs). To maintain independence from IR, the CCRS is under the Ministry of Civil Aviation, not the Ministry of Railways. The CRS certifies permanent way and rolling stock, conducts routine inspections of IR facilities and equipment, and investigates serious railway accidents.

Government is legally responsible for passenger and freight tariffs, which are set by MOR (IRB). The 1989 Railway Law is silent on pricing principles or objectives, and frequently tariff structures and levels are subject to wider political influences. However, an independent Railway Rates Tribunal, comprising a senior judge and two members, can examine complaints regarding freight tariffs, ancillary charges, or preferential treatment given to specific customers or commodities.

Ministerial Apparatus

The MOR (IRB) organigram is presented in Figure 1. Figure 2 shows the Board directorates.





    
 
 
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