A reputed international market research organisation has advised Indian Railways to move towards a more commercial approach including phasing out of cross-subsidies between freight and passenger fares, between commercial and non-commercial lines and services and rightsizing the employee base.
The Japan based Nomura Global Markets Research institute in its report has pointed that given the need to meet social objectives and in view of limited Government resources in India, a mix of socialist (public funding) and capitalist (private funding) models will likely be required.
Suggesting that Indian Railways learn lessons and experiences of other countries like United States, China and Japan to look for commercial or market based approach, the research report has mentioned that the current Railway Minister (Suresh Prabhu) has proven to be more proactive with several developmental issues and Nomura's recommendations already being implemented.
The report has sharply criticized the inadequate investment over many decades which has led to railways reeling under severe capacity strains, hampering its services and making it uncompetitive but simultaneously given thumbs up to Prabhu's approach in attracting investments, which according to the Japanese marketing team, is in "dire need for investments".
"Political and social considerations have often dominated the economic considerations, amplifying the inefficiencies by cross-subsidising passenger services through higher freight rates. Over time, this has resulted in a vicious cycle of low investments and political interference, resulting in poor service quality and lower profits to plough back into investments. We believe to break this cycle, the government needs to step up investments in railway infrastructure," says the Nomura report.
The Ministry of Railways had commissioned the organistaion for a research report for measures to re-invigorate Indian Railways. Appreciating Prabhu, Nomura has said that with an apolitical and reformist Railway Minister at the helm, a roadmap to revive IR's efficiency, financials and spending was clearly in the offing.
"In our view, profitability achieved through these changes would generate the necessary funds for gradual capacity expansion, raise the efficiency of railways as a mode of transport (for logistic companies), lower logistics costs and have a multiplier effect on boosting manufacturing competitiveness and GDP growth. The government would need to continue to play a key role in providing services on less profitable routes from a social perspective," it said.
Talking about several committees and various expert groups formed to address the challenges faced by IR over past decades, Nomura has said that a lot of these committees have time and again highlighted steps to bail out the IR but action has rarely been taken. Talking about the latest Bibek Debroy Committee, Nomura has pointed that most of his recommendations is already been done and on the right tracks.
The Nomura Global Research team has also appreciated the government's move to empower the zonal railways to carry out projects which is departure from earlier projects were scrutinised by the Planning Commission, Ministry of Finance and CCEA even when financed by private parties.
Further it has also compared the fact over the past three decades, India's road network has tripled, whereas the railway network (ie, total track length in route km) has grown by just 11 percent.
