governance, political economy, institutional development and economic regulation

Posts tagged ‘Metro’

Rebranding Indian Rail


Indian Railways: Lifeline of the Nation” — runs the bold title of a 2015 government white paper. But the reality is that post-1991 the Indian Railways (IR), whilst retaining its high ritual status, ceded ground to competition from road transport.

Too many consultant chefs

It has only itself to blame. The railways steadfastly stonewalled all attempts to reform its operations. Over the past 15 years, railway operations have been studied by no less than six high-level committees, under Rakesh Mohan (2001), Sam Pitroda (2012), Montek Singh Ahluwalia (2014), Rakesh Mohan (National Transport Development Committee, 2014), D.K. Mittal (2014) and Bibek Debroy (2015). There was no committee chair from the railways.

There are seven executive members of the Railway Board, its highest body, that functions directly under the railway minister. There are 9,124 senior Group A railway officers who are specialists in finance, commercial services, maintenance, operations, construction and production of rolling stock. It’s odd, therefore, that the government has never trusted these professionals to come up with a vision of what “the lifeline of the nation” should look like. In fact, this illustrates that reform was never an internally driven priority.

No internal support for reform in IR

Admittedly, with a large workforce of 1.3 million, unionisation in the railways is strong. George Fernandes, former railway minister (1989-1990) and Janata Party luminary, sowed his wild oats as a firebrand, railway union leader. But this is exactly why the Narasimha Rao brand of “reform by stealth” cannot work for the Indian Railways. The bottomline is that in such huge industrial enterprises there is no alternative to a broad consensus around reform and approaching it head-on.

Road wins versus rail


The railways languished in the post-reform era as it was unable to build private partnerships and leverage its assets. The government too seemed to have given up on it and turned its attention to building highways instead. So as rail passenger transportation doubled, road passenger transportation has trebled since 1990-91. The railways’ share of freight decreased from 53 per cent in 1986-87 to less than 30 per cent today.

The Indian Railways lost ground as it got mired in its own corrosive image of a government entity focused on social objectives — providing cheap, even free, travel. Thus, it lost sight of its mission to become the “economic lifeline” of the nation. Communist China moves less passengers kilometre per kilometre of its rail network than India. But it moves four times more freight kilometer per kilometre of its network than India. The India Railways’ priorities are time-warped around passenger traffic.

The seamless movement of freight over long distances can cut the cost of production and make industry competitive. Long-distance freight is best moved by rail. But the Indian Railways lost the freight business due to a monopolistic tariff policy for bulk freight, such as for coal, iron ore, cement and foodgrains. It is similar for the power sector. Bulk consumers like industry are still charged at penal rates to cross-subsidise rural and retail consumers.

Fuzzy mission

Railway minister Suresh Prabhu, like several of his predecessors, is articulate, public-spirited and full of ambitious programmes spelt out in his Railway Budget speech this year. On offer is more public investment to remove the choke points which congest and slow down traffic; a more extensive search for alternative revenues from station redevelopment and the monetisation of assets; better passenger facilities and continued implementation of the dedicated freight corridors.


But clarity on the Indian Railways’ core mission is missing. This has to be, first and foremost, the movement of freight and increasing the railways’ market share in the city and suburban passenger traffic.

Three reform measures are preconditions for success.

City and suburban travel


First, it is SMART to switch city and suburban passenger traffic to rail from road. The savings on travel time and the avoided cost of air pollution justify such investments. But this is an option only if we can make these systems attractive for private investment and management. Assured viability gap funding on the back of regular adjustment of tariff is a must. The experience of “independent” regulators in electricity shows that in large metros, with high income levels, cost-reflective tariffs can work, if customers can transparently see for themselves the value proposition the service offers.

Use scarce capital to move freight


Second, allocation of public capital across competing projects has to be “value for money”. The railways’ passenger and freight businesses should be insulated silos for accounting purposes so that costs and revenues can be allocated to each service. Our rail freight tariff is on average 40 per cent more than China’s. But our passenger tariff is on average 75 per cent cheaper. Investing to make freight move four times faster at 100 km per hour instead of 25 km per hour makes sense as there is room to reduce tariffs and expand business. Investing to move passengers at 130 kmph, instead of 70 kmph, makes no sense because although passengers are willing to pay for it the Indian Railways is not willing to charge for it.

Go for partnerships

Third, the Indian Railways must think of itself as part of a supply chain rather than a stand-alone competitor. It must seek partnerships with air, road and marine transporters, and with traffic aggregators that can yield better returns. This is possible through transparent contracts, even as the railways remains a government entity.

In 1990-91, India had few choices except to reform by stealth. We have moved on since then. The reform constituency has grown. The real concern now is how to insulate losers from the pain of change and development. Loss of employment or of land must be fairly and adequately compensated. Using scarce fiscal resources for this purpose aligns with equity and is more efficient to bump up aggregate demand than across-the-board public sector pay increases.

Adapted from the authors article in The Asian Age, July 27, 2016

Modi and Kejriwal: A New Year’s tale of two faces


Modi is the face of efficient, impersonal, big government on the pattern of China. Infrastructure development, economic growth and jobs are what this State assures. In exchange, citizens are to accept greatly constrained rights with respect to personal freedom or the public voicing of alternative sentiments. Discipline and allegiance to the party line is the leitmotif of this model.


A massive, meritocratic bureaucracy led by a charismatic and decisive leader, delivers public services to the people. It is not however a “mai-baap” colonial style government but one chosen through periodic elections. In between elections, citizens are expected to get on with their core business of living and let the constitutional apparatus (government, parliament and the judiciary) manage governance. This is quintessential top down, Weberian, technocratic governance.


The Indian model of this version of governance comes with routine misuse of government facilities for personal purposes; party expenditure on elections clearly far in excess of the limit imposed by the Election Commission; slick and opulent pandals for mammoth public meetings; the self-assured aura of a “leader” surrounded by self- important security men with guns. The fly-in fly-out schedules. The BJP is as complicit, as any other traditional party, in maintaining and growing this imperial image of big government.


At the other end of the spectrum are Kejriwal and the fledgling Aam Admi Party (AAP). He is the face of social activism and citizen centric governance. His vision of the State is as a facilitator for implementing the will of the people, ascertained not solely through elections but, to the extent possible, directly from the people between elections. Necessarily, his is a decentralized form of governance with local committees empowered to decide their affairs. The government is dis-empowered and compelled to ask the people, before taking any major decision.


The key ingredient of the Kejriwal magic is his frontal assault on corruption and the rejection of “perks” which are available to leaders today; official cars, liberal maintenance grants, opulent official homes, junkets abroad, free electricity and water etc. His personal rejection of such privileges; the symbolic travel by Metro to his swearing in; his deliberate choice of clothes, closely resembling the neighborhood vegetable vendor, all send reassuring signals to his electorate, that he is one of them.


Modi is in fact of commoner stock than Kejriwal. But long formative years spent in the network of the quasi-militarist RSS, have made him into a remote, albeit responsive figure, renowned for big public projects (Sabarmati revival, Sardar Patel Statue, 100% electrification) but in dress, speech pattern and appearance (witness his grand new office in Gandhi Nagar), very much a man who has fought his way through on merit and conquered his circumstances. A man to admire, but difficult to like.


In comparison Kejriwal exudes commonness. His speech is consciously simple and direct. His manner is warm and open, even appealing. His winning smile and shy, shrugging-off of praise and accolades, his contempt for the “Khas” (special) people dressed in a suit and tie and driving a Mercedes, instantly resonates with any one struggling to buy onions. His party consciously projects its humble beginnings, from within the people, as an organic force, a natural phenomenon, which he now ascribes to Godly assistance.  


As in the recent Delhi State elections, the BJP could be the largest single party in the 2014 Lok Sabha elections. Their recent sweep in State elections in Rajasthan and Madhya Pradesh and retention of a tribal State-Chhattisgarh, augurs well. But getting past the half way mark, even with allies, is a target as stiff as a Patiala peg.


Modi will be nearing 70 years of age by the time the next national election comes around in 2019. A rank outsider to the National Leadership of the BJP, he cannot survive till 2019 as the BJP’s Prime Ministerial candidate. 2014 is a make or break year for Modi. What are most likely to break him are the antipathy of the Muslims and the Kejriwal inspired impatience of the urban common man with traditional elitist, more-of-the-same politics.


Modi may find to his dismay, Kejriwal/AAP clones cutting into his traditional, urban, vote bank of business men, professionals and the middle class, at least in the 50 large metros which have a vote share of 15% of the national electorate. Coupled with the near certain loss of the Muslim vote comprising another 15% of the national vote share, Modi will be left battling to get a 40% vote share. He will have to jostle hard with caste based and regional parties and the Congress in UP, Bihar, Haryana and Karnataka. A very tough call indeed.


My New Year’s wish is a BJP plus allies national government, with a wafer thin majority to keep them on their toes and at least 20 Kejriwal/AAP clones as Members of Parliament out of the 542 seats in the Lok Sabha. This would put the AAP plus clones in the same league as the existing strength of Mulayam’s Samajwadi Party (22); Bhenji’s Bhujan Samaj Party (21), Didi’s Trinamool Congress (19), Nitish Kumar’s Janta Dal (United) (19), Karunanidhi’s DMK (19), the CPM (16), Naveen Patnaik’s BJD (14) and way ahead of the Shiv Sena (11), Amma’s AIDMK (9) and Sharad Pawar’s NCP (9).


India needs a makeover. What better than BJP, a traditional, effective, centralized, growth and jobs oriented party, for near term governance till 2019? Thereafter, scaling up of the Delhi State Government model of decentralized, citizen centric, corruption free government, being rolled out by the AAP from January 4, 2014. I earnestly hope God reads blogs.






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