Bibek Debroy Committee : Important Recommendations

 

The Bibek Debroy Committee in its report on the Indian Railways recommends sweeping changes in the way the ailing organisation runs. Some of them are:

1) Transition to commercial accounting:

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 re-drawn, 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:

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).

(Pic Courtesy: Indian Railways)

(Pic Courtesy: Indian Railways)

3) Focus on non-core areas:

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:

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:

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. 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.

7) Independent regulator:

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. There are too many Zones and Divisions and thus a rationalization exercise is required.

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.

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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