A regulator to fix tariffs is an idea long overdue
Given the Railways precarious finances, and the additional R32,000 crore burden it has to bear because of the Pay Commission next year, fixing this is of vital importance if the Railways is to be able to continue functioning. While the finance ministry is shouldering a larger part of the Railways capex needs—The Indian Express has reported a R12,000 crore cut in this year’s commitment due to ‘poor pace of work’ and a refusal to help with the pay panel obligations either—and the state-owned LIC has also been roped in to lend it money, this cannot carry on forever. The Railways subsidy on passenger traffic has galloped from R 6,200 crore in FY05 to a likely R30,000 crore in FY16—as a result, its fare-to-freight ratio has halved from 0.47 in 1950-51 to 0.27 in 2010-11. If the Railways were to be able to continue to overcharge freight—as it has for the last several decades —it wouldn’t matter, but its share in freight has fallen from 89% to 36% in this period.
It is in this context that railway minister Suresh Prabhu is trying to push the Railway Regulator Bill—if the government doesn’t agree to raise passenger fares to levels fixed by the regulator, it will have to pay the Railways for the subsidy. Normally, the regulator should be in place after the Railways has a functional commercial accounting system in place—this could take 1-2 years—but it is possible for the regulator to fix fares based on approximate costs for now, and fine tune this when the Railways has a fully functional commercial accounting system in place. If this is not done, with the Railways going broke, and the finance ministry not able to bankroll it indefinitely, its expansion and even continued operations are in jeopardy. Hopefully, Opposition parties like theCongress will realise how critical matters are, and help pass the Bill at the earliest.