Indian Railways need many kinds of modernisation, not just fare hikes

Sam Pitroda, adviser to the Prime Minister, has reportedly recommended raising passenger fares and linking rail tariffs to inflation from next year. The first part is wholly welcome, the second, not so much. Fares and freight must reflect costs and productivity, which are affected by competition, managerial efficiency and investment in technology and modernisation. Frequent revisions of fare and freight are warranted, not removing pricing freedom by fixed linkage to an index like the wholesale price index.

The fuel part of the Railways’ costs needs to be fully passed on, but it is entirely possible that system-wide efficiency improvements could help reduce other elements of cost, so that the final required change in fare/freight might be quite different from any change in the general price index. Passenger fares are heavily subsidised and have not been raised for eight years, forcing the Railways to draw down heavily from reserves meant to replace aged assets.

Such a compromise on safety is unacceptable. The Railways should make large-scale investments to modernise and improve service quality. It should spend more money on track renewals and new rolling stock, invest in electrification and computerised signalling systems, especially for high-speed operations. Investments can be stepped up only when finances are robust. A crucial reform, therefore , is to end the practice of freight and upper-class passengers subsidising lower-class passengers. The Pitroda panel has done well to suggest reforms on multiple fronts.

One, enhance freight revenues and cut operating costs. Surely, keeping freight rates untouched will not help the Railways garner a larger share in movement of goods. So, it has to break new ground to compete with road freight. Running freight trains to a predictable time schedule is not rocket science but has been treated like the holy grail by successive railway ministers. Huge investments and revenues are possible in moving cargo, including ore and coal, to and from ports. Rope in the private sector in augmenting rolling stock and yards, commercialise land and air space. The main thing is to get going on a proactive agenda of reform.