Prabhu right, Board needs revamp to be effective
Railway minister Suresh Prabhu is right in arguing that unless the Railway Board is revamped, it is going to be difficult for the organisation to become viable. It is, of course, true that the Railways incur around R30,000 crore annually by way of subsidies to passengers and, to the extent this is paid from the central budget, its finances will be better. The problem, however, is more deep-seated given the huge funds required for both fixing the safety aspects of the network as well as expanding it—in any case, it cannot be anyone’s case that all subsidies can be removed within just one year. In FY17, for instance, the R40,000 crore or thereabouts that the Railways will need to spend due to the Seventh Pay Commission—in a full year, the amount is R32,000 crore but this becomes due from January 2016—could kick the operating ratio to the 97-98% levels, leaving the transporter little funds for investment; even this year’s target ratio of 88.8% is likely to be breached since there has been a large shortfall in revenues already. It is to get a sharper focus that Prabhu has written to Railway Board Members, asking them for suggestions in the next two weeks on how to revamp the structure of the Board.
With such large tracts of land and commercial space within stations, and on trains, non-fare revenues should comprise at least 30% of the Railway revenues—this is the number former railway minister Dinesh Trivedi was aiming for, in keeping with the Japanese railway—but these are minuscule right now. But, and here’s the problem, were the Railways to contract advertising rights to a company in the manner the BCCI does with telecast rights for cricket matches, that company would have to deal the engineering department for permission to advertise on the railway platforms, with the electrical department so as to get connections for back-lit kiosks/billboards and the mechanical department if the advertising has to be taken on to trains. While Dinesh Trivedi had talked about a Member PPP to get over these kind of troubles, with 13 services within the Railways, many powerful departments function as independent silos, so it is not clear if this would have been the solution. After Suresh Prabhu spoke of the need to create dual-traction locomotives that could run on diesel where the tracks were not electrified, for instance, the battle between two wings of the ministry ensured the pilot project for 10 such locos was split between the diesel and electrical locomotive plants.
If the Railways is to able to meet changing consumer needs—apart from freight, even its share of short-haul passenger traffic is falling—it needs to be a lot more dynamic. That means each department—represented by powerful Members in the Railway Board—needs to work together. As Prabhu has said in his letter to the Board, “any theme that requires us to collaborate has languished … increase in average speeds, integrated use of Information Techology, integrated planning, etc”. Few successful organisations the world over function in silos, indeed while the Railways may want to preserve their 13 different services in order to impart some degree of specialisation, after a certain level of seniority, people have to be free to move across branches; most important, the Board has to be flexible enough so as to allow a quick organisational response to changes in customer demands/preferences.
With the railways’ finances beginning to bite, and the finance ministry is making it clear it will not be able to help much in FY17, railway minister Suresh Prabhu has asked Railway Board members for suggestions — within 15 days — on how the board needs to be restructured.
Till October, the railways was around 10% short of its internal target for passenger and freight revenue, making it clear that FY16’s operating ratio target of 88.5% will be breached significantly. On top of this, the railways needs to spend at least R32,000 crore next year on account of the Seventh Pay Commission (SPC) — since the SPC will be applicable from January 2016, the burden in FY17 will be R40,000 crore.
The biggest problem, Prabhu has highlighted, is the “lack of cross-functional collaboration”, as a result of which “any theme which requires us to collaborate has languished, eg, increase in average speeds, integrated use of Information Technology, integrated planning, motive power strategy, etc”.
In addition, Prabhu has asked members to orient the board “to business needs rather than functional needs”, as a result of which “we have made limited progress in increasing non fare revenues which is primarily due to lack of this ‘business mindset’”. “Corporate goal”, Prabhu has said, “must take precedence over anything else”.
Advertisements, from where the railways gets only R350 crore a year right now, are a good example of such lack of cross-functional collaboration. If the railways is to get higher revenue from here, there will have to be a concerted effort to get advertising in railway stations as well as on trains. Any company working on this will have to deal with the engineering department for platform advertising, with the electrical department if the advertising is to be backlit, with the mechanical division if the advertising is to be on trains — there are 13 different services within the railways.
The Railways Project Simran, to be able to do 24×7 tracking of trains was, to cite another example, launched as a pilot by the signalling and telecom department but got stalled due to factional rivalries in the Railway Board. The project was finally given to traffic operations and has yet to restart.
In another case involving the making of dual-traction locomotives that can run on both diesel and electricity, a tussle between the mechanical and electrical wings of the Railway Board ensured that the pilot project of 10 locomotives was split between Chittaranjan Locomotive Works (electrical) and Diesel Locomotive Works (diesel), instead of being entrusted to just one of them.
While restructuring of the Railway Board has been something several committees have suggested in the past, Prabhu wants the board members to make suggestions so that there is a greater buy-in from within and, in any case, the suggestions will probably be more realistic than those from committees set up under non-railway officials. The financial powers of the board had, in any case, changed considerably since Prabhu had decentralised a lot of decision-making down to the level of general managers last year.
The railways’ earnings up to October this fiscal were lower than its own internal target for the period by Rs 9,086 crore or 9%, resulting in a worrisome operating ratio of 97%.