Railways rejig gets a thumbs up but may not be enough to fix financial mess

The Railways has incurred loss of over Rs 16 crore per day due to the farmer agitation in Punjab

The Indian Railways has been going through a churn in the last few months but the latest change comes at the very top. The all-mighty Railway Board, the top decision-making body of the railways set up during the British Raj, has been pruned and restructured.

In a late evening order on September 2, the Appointments Committee of the Cabinet said the strength of the board has been reduced to five members from eight, the designation and responsibilities of the CEO added to the chairperson’s post and a position of member (HR) created. Three positions—member (staff), member (engineering) and member (materials management) –have been done away with.

The restructuring follows a cabinet decision in December that also gave the go-ahead to reorganise eight ‘Group A’ services into a Central Service to be called the Indian Railway Management Service (IRMS) to end the rampant “departmentalisation” of the national transporter. This second, more contentious reform, is yet to be implemented. 

The railways has had separate departments for handling different functions such as traffic management and rolling stock. Headed by secretary-level officers, called members, each department is a complete unit in itself, which has often led to fractious decision-making. 

In the new scheme of things, chairman VK Yadav will also be the chief executive officer of the 114-year-old board, which will have four members other than him. He will also be the cadre-controlling officer, responsible for human resources, who will be assisted by a director general-level officer. 

Pradeep Kumar has been appointed member (infrastructure), PC Sharma member (traction and rolling stock), PS Mishra member (operations and business development) and Manjula Rangarajan has been named member (finance).

 A good first step

Ajay Shukla, a former member (traffic), welcomed the reorganisation, calling it a good step. Shukla, however, wondered if reorganisation alone would be enough to ensure the financial well being of the national transporter.

“This decision to shrink the board is a good step,” he said, adding a large board meant confusion in decision-making. 

“But will this restructuring help the IR financially? This totally depends on how the chairman and the railways minister use the board. By itself, this reorganisation is unlikely to be relevant to the railways’ financial situation,” he said.

The railways has been missing its annual earnings’ targets for the last many years even after showing a year-on-year increase in earnings. 

This was the situation before the coronavirus blow and its finances in 2020-21 are likely to be in a worse state due to severe travel restrictions and lockdowns.

The railways, another former board member said, had more technocrats than operations experts and that the former had “little commitment towards the business aspects of the organisation”. 

“Till now, member (traffic) was responsible for the operations and commercial part but without adequate decision-making powers over aspects such as which equipment to commission,” the former member said on condition of anonymity.

The eight members of the erstwhile board were seen operating in silos, often accused of focusing on the well-being of their departments rather than the railways.

Financial mess

The reorganization of the board can, at best, be seen as a first step in the railways quest for efficiency in operations and eventually in improving its precarious finances. 

As per a parliamentary standing committee report on the demand for grants for the railways for 2019-20, the transporter has been falling short of targets in annual gross traffic receipts throughout the 2014-19 period, which coincides with the first term of the Modi government. 

In 2015-16, the shortfall between the target and actual gross traffic receipts was a little over Rs 19,000 crore. It increased to over Rs 19,500 crore in 2016-17 and dropped to around Rs 10,000 crore each in the next two financial years.

In 2019-20, the railways again missed the target by more than Rs 31,000 crore. But unlike the previous years, the earnings were lower—by more than Rs 15,000 crore—when compared to the previous fiscal. 

In 2019-20, the operating ratio–the money spent to earn a rupee–was also at a record high of 97.46 percent. In four of the last five years, this ratio has been over 95 percent: 96.5 percent in 2016-17, 98.4 percent in 2017-18, 97.29 percent in 2018-19. 

For 2020-21, the budget target for the ratio is 96.28 percent but this was before the pandemic struck.

JP Batra, a former Railway Board chairman, said the restructuring would help the efforts to raise finances through different methods. 

“But having said that, political will still remains the main force behind improving the system. For example, the Indian Railways continues to cross-subsidise passenger fares through freight earnings...through the restructuring of the board, a lot can be done within the system itself to bring in efficiencies,” Batra said.

The restructuring comes after years after half a dozen committees called for pruning the board and doing away with the departmental approach. 

On clubbing various services into a single entity, Batra advised caution, saying this was a sensitive issue for officers and employee unions. Officers were apprehensive about their career progression once the services were merged, he said. 

Sindhu Bhattacharya is a journalist based in Delhi who writes on a range of topics in business and economy.