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  4. No need for a separate Railway Budget, says NITI Aayog member Bibek Debroy (Exclusive)

No need for a separate Railway Budget, says NITI Aayog member Bibek Debroy (Exclusive)

Renowned economist and NITI Aayog member Bibek Debroy has confirmed that the panel headed by him has indeed recommended to the government that there is no need to have a separate Railway Budget and that this annual practice should be done away with.

Raj Singh Raj Singh Updated on: June 22, 2016 22:47 IST
Bibek Debroy
Bibek Debroy

New Delhi: Renowned economist and NITI Aayog member Bibek Debroy has confirmed that the panel headed by him has indeed recommended to the government  that there is no need to have a separate Railway Budget and that this annual practice should be done away with.

 
In an exclusive interview to www.indiatvnews.com, Debroy opened up on a range of issues including why the Railway Budget is no longer needed, the chances of Indian Railways becoming profitable and the privatisation debate.
 
Debroy rued the fact that the Railway Budget has become a platform for MPs to demand certain political and populist objectives like new trains, more stops etc.  
 
He also exuded confidence that if all recommendations made by his panel are accepted by the government then the Railways can begin showing profit within 5 years.
 
On privatisation, he pointed out that most people are not aware that the  policy already permits private entry  including private trains. However, he agreed that private players are not coming forward because they can neither charge fares nor do they have access to tracks.
 
Here are the excerpts of the interview:
 
Why a separate Railway Budget is not needed
 
Well, the panel has recommended that there should be no separate Railway Budget and there are at least 5 important reasons behind making that recommendation.
 
First, the idea behind the separate Railway budget goes back to the Acworth Committee in 1924. (Sir Willian Mitchell Acworth headed the Committee on Indian Railways set up during British Raj) Things have changed a lot since 1924.The rationale that the Acworth Committee gave was in a certain historical context which no longer remains relevant. The Acworth Committee gave several recommendations out of which only this one was accepted. The Acworth Committee wanted this to achieve certain objectives. None of those objectives were achieved.  

Second, whether the Railways is corporatized or not is a separate issue but we want the Railways to function on the basis of commercial principals. If it functions on the basis of commercial principals then the decision should be taken by the (Railway) board because that is the relevant body which will increasingly begin to resemble a corporate board regardless of whether it is corporatized or not. Therefore, all commercial decisions should be taken by the board.

Third, there is no constitutional or legal requirement for a separate Railway Budget. Unlike the union budget where the constitution mandates the presentation of the union budget before parliament, there is no such requirement for a Railway Budget. There is absolutely no reason, legal or constitutional.
 
Fourth, the Railway Budget has become a platform for MPs to demand certain political and populist objectives like new trains, more stops etc.  As I said, these decisions should be taken by the Railways on commercial grounds. I’m not saying that everything that the Railways does has to be commercial but whatever is done for a social objective, the government must figure out a ways for reimbursing the Railways for those social costs and that has nothing to do with the parliament.  Parliament, as I said, is obsessed with populist kind of measures.
 
And the fifth and last reason is that there is a very complicated and non-transparent relationship between the Finance Ministry and the Railways Ministry. That has to be become transparent and clean. These are the major reasons why our committee thought that the Railways budget should end.
 
One more thing, when the Acworth Committee report came in 1924, they listed out about 8 countries which had separate Railways Budgets. Today, none of the major countries including those which were mentioned in the Acworth Committee Report have separate Railway Budget.
 
Railways can become profitable within 5 years
 
The Railways becoming profitable is contingent on all of those things happening that we had recommended and I am not talking out the budget part only. We had made recommendations about an independent regulatory body, decentralisation, and transition to commercial accounting, breaking down of silos in terms of entry of officers into the Railways and finally private entry.
 
If you do all of those and in addition you do not reduce the overall manpower but make the deployment of manpower, at least the composition, more efficient, probably 5 years down the line , you will begin to show some profit particularly when your revenue is not only driven by passenger and freight but you also begin to generate revenue through other means and there are plenty of mechanisms for generating revenue outside passenger fare and freight rates.
 
One more thing, we have to define what the Railways are. One of the things that we recommended in our report was that the core function of the Railways was to run trains. It is not necessarily the core function of the Railways to either run a RTF or to run schools or hospitals. The committee did not recommend that these things should be closed down but it did recommend that these should be taken out of Railways. The reason I am mentioning this is that a lot of the losses of the Railways are on these counts.
 
Is it time to privatize Railways?
 
We did not use the word ‘privatization’ because the word ‘privatization’ is misunderstood and very carefully in our report we said we are not using the word ‘privatization’ because it means two completely different things.
First definition of ‘privatization’ is I’m privatizing the equity of the Indian Railways. We have not recommended that.
 
The second use of the word ‘privatization’ is when I’m allowing private entry. Allowing private entry is completely different from saying that I’m going to privatize the Indian Railways in the sense of selling the equity of Indian Railways. We recommended private entry, not the sales of equities of Indian Railways.
 
And private entry does not mean private operators only. If you go to a Railway Station today, who do you think does the cleaning of Railway station? It’s not done by the department.  It’s outsourced, done through contracts. You are served food on the Railways, who do you think serves it? Very rarely is it departmental, it is all outsourced.  So don’t think only in terms of private operators in it. Private entry means private entry into everything.
 
Most people don’t know that most of the services are already given by the private sector. Most people don’t know that the owing of a private train is already allowed.
 
Private operators are already allowed to run both passenger trains and freight trains, even before our committee recommended it.  Most people are not aware of this.
 
Even before our report, private operators of passenger and freight trains were already allowed. What our report did was to point out the problems that existed with the existing private entry provisions.
 
The question is – does the policy permit it? Yes, the policy permits it. Secondly, will you run a train? You won’t run a train because even though the policy permits it you’ll not get the access to track because the capacity is not there.

The point is not that the policy does not permit the private train. The policy permits private trains but no private sector will come in because a) the fare are still controlled by the Railways Act, only Railways can charge fares and b) you do not have access to tracks.
 
My committee recommended rationalization of these barriers to entry.

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