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Long-Awaited Railways Regulator Gets Department of Personnel Nod

Five months after cabinet approval, the department of personnel and training has started paving the way for setting up the Rail Development Authority.

Passengers travel on an overcrowded train at Loni town in Uttar Pradesh. Credit: Reuters

Passengers travel on an overcrowded train at Loni town in Uttar Pradesh. Credit: Reuters

New Delhi: The long-awaited regulator for Indian Railways is finally set to become a reality, with the department of personnel and training (DoPT) paving the way for selecting a chairman and four members.

The DoPT’s approval for the rail regulator, which will be known as the Rail Development Authority (RDA), was the last hurdle for setting up the body that will help the state-run transporter free itself from political pressure on fares while ensuring a level playing field for private players keen to invest in the rail sector.

While there are regulators in the insurance and telecom sectors, the RDA will be the first independent body of its kind in the railways and has been billed as a major reform step. Besides taking decisions on pricing of services, it will also look into consumer interest and the creation of a positive environment for investment and benchmarking of service standards against international norms.

According to the terms and conditions finalised by the DoPT, the chairman will get Rs 4.5 lakh per month as consolidated salary while members will get Rs 4 lakh each, said a senior railway ministry official involved with the setting up of the regulatory authority.

Asked why it took so long for the DOPT to finalise it after the cabinet’s approval on April 6 this year, the official said the DoPT was working out the details in the light of the seventh pay commission recommendations, so it took some time to get the final approval. Hoping that the regulatory body would be operational by year-end, the official said the posts would now be advertised and a search and selection committee headed by the cabinet secretary would select the chairman and members.

Taking political sting out of railways

The need for a regulatory body in the rail sector has been felt most urgently over the last decade, with successive railway ministers refusing to revise passenger fares. This has led, inevitably, to freight revenue subsidising passenger traffic, leading to higher industry costs.

Currently the passenger business is suffering a huge loss of around Rs 34,000 crore a year and is being cross-subsidised from the freight sector.

It was felt that if an independent regulator recommended a revision of fares and freight rates then the railways would have no option but to accept this, which would also take the political sting out of the decision. Moreover, in the era of coalition politics, the railway ministry more often than not was handed over to an ally of the ruling party at the Centre.

As a result, governance in the railways has largely been with regional leaders such as Lalu Prasad, Nitish Kumar, Ram Vilas Paswan, Suresh Prabhu and Mamata Banerjee.

An attempt was made to hike fares when TMC leader Dinesh Trivedi was the railway minister. He was replaced shortly after that, with the hike being rolled back by his successor Mukul Roy. However, after TMC‘s exit from the UPA, Congress leader Pawan Bansal took over the ministry and raised fares in 2013, which was almost after 11 years of a no-fare increase spell.  

The need for a rail regulator has been emphasised since 2001 by various committees. The first recommendation for an independent rail regulator came in 2001 when an expert group under the chairmanship of Rakesh Mohan suggested the formation of a regulatory authority to fix rail tariffs. Later, several railway committees suggested a Railway Tariff Development Authority. The most recent recommendation for the RDA came through the National Transport Development Policy Committee in 2014 and Bibek Debroy’s committee in 2015.

Railway minister Suresh Prabhu had announced in the Rail Budget 2015-16 that for the purpose of orderly development of infrastructure enabling competition and protection of customer interest, it is important to have a regulatory mechanism independent of the service provider.

“Further, it was proposed to set up a mechanism for making regulations, setting performance standards and determining tariff,” Prabhu, whose tenure has also witnessed the merger of rail budget into main budget, said in his speech.  

Aiming at changing the Indian railways landscape

According to officials, the RDA will decide the pricing of services commensurate with costs, take decisions on enhancement of non-fare revenue, protect consumer interest by ensuring quality of service and cost competition. It will also be responsible for competition, efficiency and market development.

The regulator will also provide a framework for non-discriminatory open access to the ‘Dedicated Freight Corridor’.

The RDA chairman and members will have a fixed term of five years each. They can be removed by the central government only on certain grounds, including insolvency, conviction, misbehaviour, physical and mental incapability.

The railway regulator, however, will still work within the parameters of the Railway Act, 1989.

Arun Kumar Das is a freelance journalist.