India



Conclusion

Not only has India one of the largest and busiest railways in the world, but also, IR is arguably the most traditional and monolithic in its basic structure. In fact, it closely resembles the archetypal railway described in this toolkit—prior to considering the alternatives (). Traffic growth has underpinned management initiatives to attain steady and significant improvements in staff productivity and equipment utilization. Nevertheless, IR has not been notably innovative in using modern rail technology, nor in transforming to more commercial management structures, nor focused on service quality or market-responsiveness. Instead, when seeking commercial focus, it has tended to create semi-autonomous enterprises that bypass its own structures. The burst of improvements and achievements in business processes during 2004-08 appear to have been originated and driven by specific Ministerial leadership, rather than emerging from the permanent institutions of industry structure.162 And the subsequent diversion of a large part of those gains into the wages bill is a common feature of politically driven enterprises.

Railway policy-making and regulation are ultimately about discerning long-term public interest in railway transport and then protecting it. Now, these MOR (IRB) responsibilities are by statute and design wholly interwoven with responsibility and accountability for the commercial service delivery of ZRs. This structure appears to be based on implicit assumptions that the interests of Indian Railways and the public are one and the same—or that any conflicts that arise between IR interests and public interests are best resolved by a single body with both policy and commercial responsibilities. However, these assumptions are no longer accepted in most economic sectors and in most countries. Instead, modern business eschews these structures on the grounds that they barricade institutions against encroachment, discourage innovation by new participants, undermine market focus, and inhibit commercial instincts. The Indian experience does little to contradict the theoretical structural weaknesses of the monolithic railways structure.

Despite several ad hoc initiatives, the overall degree of private sector participation is currently low by international standards. However, MOR (IRB) may adopt a policy to encourage private sector participation in core and non-core railway activities, which would reduce the industry’s monolithic nature. It remains to be seen whether policy change in favor of private sector participation will result in the institution embracing a more pluralistic industry.

The infrastructure challenges facing IR were set out by MOR (IRB) in Vision 2020, but building the political will, technical capacity, and financial sources to attain Vision 2020 has barely begun and the risks of deferral or dilution appear substantial. Moreover, while Vision 2020 provides a bold and positive vision of new freight and passenger lines, the equally difficult problem remains unaddressed, of the little-used non broad-gauge network-over 11,000 route-kms or about 18 percent of the total IR network—which carries only 1.0 percent of total IR traffic.

The IR challenges set out in the Mohan Report include the lack of clear purpose, confusion between commercial objectives and social roles, and politicized decision-making that hampers commercial focus. Beyond the measures that have since been taken, Mohan suggests that government policy functions should be separated from commercial operations, non-core activities should be spun off, and commercial management on lines of business and market segments should be refocused.

Since the 1989 Railway Act, India’s economy has been modernized and transformed by more open international trading relationships, greater reliance on market forces, a stronger role for the private sector, and greater competition in trade and services. Now thirty years on, and based on performance as well as governance principles, it is appropriate for India to consider whether its railway sector’s traditional institutions remain in the best interests of India’s new economy.

    


162 Sudhir Kumar and Shagum Mehrotra, Bankruptcy to Billions–How the Indian Railways Transformed, (Oxford University Press, 2009).
 
 
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