Indian Railways: 10 transformative recommendations of Bibek Debroy Committee

report(ET)
The Bibek Debroy Committee in its interim report on the Indian Railways recommends sweeping
changes in the way the ailing organisation runs. From encouraging private players to run trains to
eliminating the Railway Budget altogether, the report dwells on all that ails Indian Railways and
recommends steps to decentralise its operations for effective management.
In a telephonic conversation with Economic Times website, Bibek Debroy highlighted the ten key
recommendations of the interim report. Bibek Debroy will also be available for an
interactive Twitter chat on the interim report on @EconomicTimes. Join us on April 7 from 4:00 PM 5:00 PM and have Bibek Debroy answer your queries.
1) Transition to commercial accounting: According Debroy, the process of accounting in Indian Railways
is "very complicated". "It is impossible to figure out what the rate of return on a project is," he said.
The report recommends: Refinements in the way Indian Railways prepares and maintains accounts, and
costs its businesses, activities and services. The financial statements of Indian Railways need to be redrawn, consistent with principles and norms nationally and internationally accepted. Casting accounts
in standard commercial accounting format and making appropriate financial disclosures would not only
facilitate prospective investors in assessment of risk and decision on their possible investment forays
into IR but would also help IR to quantitatively assess impact of policy interventions on cost of various
services.
2) Streamline recruitment & HR processes: "There is a multiplicity of different channels through which
people enter the railway services. We essentially recommended unifying and streamlining the process,"
Debroy said.
What is recommended: At present there are eight organized Group 'A' services in Indian Railways.
Deployment to these services is by direct recruitment from UPSC (Civil Service and the Engineering
examinations) and also by promotion of Group 'B' officers of the department. There is also a small but
significant element of recruitment of Mechanical Engineers through the Special Class Railway
Apprentices examination, followed by training. The eight services can be broadly categorized in two
bigger groupings viz. technical and non-technical services.
IR should consolidate and merge the existing eight organized Group 'A' services into two services i.e.
the Indian Railway Technical Service (IRTechS) comprising the existing five technical services (IRSE,
IRSSE, IRSEE, IRSME and IRSS) and the Indian Railway Logistics Service (IRLogS), comprising the three
non-technical services (IRAS, IRPS and IRTS).
3) Focus on non-core areas: Debroy feels that a lot of tasks carried out by the Indian Railways are not
at the core of the prime business of rail transportation. These activities include running hospitals and
schools, catering, real estate development, including housing, construction and maintenance of
infrastructure, manufacturing locomotives, coaches, wagons and their parts, etc.
"Not for a moment have we suggested that you close these down," he said. To this list must be added
the Railway Protection Force and Railway Protection Special Force, which carry out functions which
should normally be performed by State Police forces, or conveniently outsourced. To maintain and run
these diverse sets of peripheral activities, Indian Railways has created a monolith organizational
structure. There is a strong case for revisiting these activities.
Indian Railways should focus on core activities to efficiently compete with the private sector. It will
distance itself from non-core activities, such as running a police force, schools, hospitals and
production and construction units.

Immediate integration of the existing Railway schools into the Kendriya Vidyalaya Sangathana set-up.
Instead the needs of the children of Railway employees could be met through subsidizing their
education in alternative schools, including private schools.
4) Decentralisation: "We have recommended a substantial amount of decentralisation. We are not
talking about decentralisation at the level of the GM, who is in charge of a zone. We are talking about
decentralisation down to the level of the DRM who is in charge of a division, or station superintendent.
A little bit of decentralisation has already happened, but it has only happened at the level of the GM.
For the average passenger today, there is no one single person who is responsible for a station," Debroy
explained.
The report recommends: To ensure proper decentralization, there is a need to delegate enhanced
powers, especially in respect of tenders connected with works, stores procurement, service or even
revenue-earning commercial tenders, to the DRMs. Some of the suggestions made by the committee
are; finance must completely be under the DRM; ADRMs should be an explicit part of the administrative
chain; some earnings by the Division should be retained at the level of the Division.
5) Indian Railway Manufacturing Company: According Debroy, wagons are already produced by the
private sector. Coaches and locomotives could follow. Unless they are freed from 59 their constraints,
the existing production units will be unable to face this competition, he says.
"You have to remove them from the shackles. All the production units which are not core to the Indian
Railways operations, all the production workshops whether it is coaches locomotives, put them under
Indian railway manufacturing company. We have not said you are privatising it, but you sort of freeing
it from the present system," he says.
The Committee proposes that all these existing production units should be placed under a government
SPV known as the Indian Railway Manufacturing Company (IRMC). While this remains a government SPV,
at least initially, under the administrative control of the Ministry of Railways, making it a government
SPV makes it independent of the Ministry of Railways and the government, including in the
determination of salary structures, and allows it to borrow.
6) Encouraging private entry: Private entry into running both freight and passenger trains in
competition with Indian railways should be allowed and private participation in various Railway
infrastructure services and non-core activities like production and construction, should be encouraged
by the Ministry of Railways.
"The reason private players find it unviable to operate is because they do not have access to the tracks.
They do not have access to tracks because as it inevitably happens, Indian Railways gives preference to
the Indian Railway trains. Therefore, we recommend having a separate track holding company, which
remains public, from that part of Railways which runs trains. This track holding company will be
neutral between Indian Railways and the private players," explains Debroy.
7) Independent regulator: Shift regulatory responsibility from the government to an independent
regulator as the private sector will only come in if there is fair and open access to infrastructure,
recommends Debroy. The independent regulator shall ensure fair and open access and set access
charges; establish tariffs in cases where there the market fails to discover a price; and adjudicate
disputes between the track-owning organization and train operators; and between competitors. This
will make fair and open access a reality and open up both freight and passenger trains, in competition
with IR.
The report recommends setting up a Railway Regulatory Authority of India (RRAI) statutorily, with an
independent budget, so that it is truly independent of the Ministry of Railways.
The RRAI will have the powers and objectives of economic regulation, including, wherever necessary,

tariff regulation; safety regulation; fair access regulation, including access to railway infrastructure for
private operators; service standard regulation; licensing and enhancing competition; and setting
technical standards. It should possess quasijudicial powers, with appointment and removal of Members
distanced from the Ministry of Railways.
Debroy feels that the Ministry of Railways should set the policy, whoise enforcement and
implementation will in turn be done by the regulator. The Railway Board should continue only as an
entity for the Indian Railways (PSU).
8) Social costs & JVs to bear them: Constructing new suburban lines should be undertaken as joint
ventures with state governments, not otherwise, says Debroy. There are too many Zones and Divisions
and thus a rationalization exercise is required. "We have recommended taking out Kolkata Metro from
the railway system. No other metro is part of the Railway system, why should Kolkata metro be a part
of it?" asked Debroy.
Suburban railways should ideally be hived off to State governments, via the joint venture route. Until
this is done, the cost of low suburban fares, if these fares are not increased, must be borne by State
governments on a 50/50 basis, with MOUs signed with State governments for this purpose.
The freight rates should be left to market principles, once liberalization takes hold, and no such
freight-related social cost should be imposed on Indian Railways.
9) Changing relationship between government & Railways: A separate Railway budget should be phased
out progressively and merged with the General Budget, the report says. "Cleanly separate out the
relationship between the Union Government and the Railways. End gross budgetary support, end this
system of paying dividends and therefore you effectively end the railway budget. You not only end the
railway budget, you eventually also end the Ministry of Railways and integrate it into a Ministry of
Transport," Debroy explains.
10) Raising resources: For raising resources for investments, an Investment Advisory Committee may be
set up, consisting of experts, investment bankers and representatives of SEBI, RBI, IDFC and other
institutions. The existing assets of Indian Railways may be leveraged to raise resources and institutions
created like InviT, NBFCs. The modalities by which returns can be secured for such investments should
also come under the purview of this Investment Advisory Committee.
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