The government’s decision to fill 90,000 vacancies — which is being touted as the largest recruitment drive in the world — in the railway is retrogressive and it will further impact the Indian Railways’ financial health

Subir Roy

The media is full of positive stories of how the Indian Railways is seeking to modernise — new well designed coaches for long distance travel, serving affordable quality food on board, a more user-friendly portal for ticketing and reservation, cleaner and better looking railway stations, and most importantly, a slow improvement in the accident rate.

All this is true but there is an underlying larger negative story that is rarely highlighted: a steady decline in financial health. This hit an all-time low when the railways clocked an operating ratio of 111.51 percent during the first four months (April-July) of the current financial year (2018-19). This means that for every Rs 100 revenue it earned, it spent Rs 111.51.

The operating ratio, like the fiscal deficit, begins the year badly but gets better on its own as the year progresses. But last year, when it found that it was heading for a negative operating ratio of 104 percent, in went in for a bit of pure window dressing — secured an advance of Rs 7,300 crore from NTPC (for carrying coal) and IRCON (against land monetisation) and brought down the operating ratio to a face saving 98.5 percent. This key ratio has been steadily deteriorating over the last 10 years, from 90.46 per cent in 2008-09 to the present levels.

This is the result of several adverse factors coming together — loss of market share (to road haulage for cargo and airlines for passengers) and slow revenue growth, and rise in costs from factors beyond the railways’ control (primarily impact of the pay commission’s award).

But the tragedy is that in a key area where things are within its control, i.e. policy, the railways has been taking the wrong decisions. One such was to merge the railway budget with the Union budget, making the railways more of a departmental undertaking compared to the good degree of autonomy that it earlier enjoyed.

This has led to discontinuing the issuing of the railway budget papers, making for less transparency. If you have to search high and low for information that was earlier readily available with the railway budget papers, such as the explanatory memorandum, then this can hardly promote informed debate and the evolution of the right policies.

What is more, by becoming an indistinguishable part of the government, the railways has to take as given things such as levels of compensation recommended by the pay commission. Had the railways been corporatised with the government holding even 100 percent equity, it could have engaged with its staff in negotiations, as public sector banks do, where ‘ability to pay’ is a factor. Instead, it is now asking the government for additional budgetary support to help it pay the enhanced salary and pension bill, which now takes away well over half of its revenue.

As if this was not bad enough, the government has taken a monumentally retrogressive decision which will condemn the railways to perpetual ill health.

To counter the criticism of overseeing jobless growth, it is filling up 90,000 vacancies in so-called safety related posts (this concept is flexible) — the exercise being touted as the largest recruitment drive in the world. This, when the railways’ own vision outlined earlier was to slowly bring down the number of employees. This would have tied up well with the introduction of new technology requiring fewer but more skilled hands.

If you sit long enough on reform then the window of opportunity for it can pass. Earlier, all bemoaned the fact that the railways’ finances were held hostage to politicians’ decision to keep passenger fares low, leading to freight revenue subsidising passenger traffic. Hence the long term demand for an independent tariff regulatory commission. Today, this is a non-issue as passenger numbers are stagnating, and raising fares significantly could depress passenger revenues further.

Sometimes, when reform finally comes, it does so in a half-baked manner. When accidents shot up a few years ago there was call for an institutional arrangement at the highest level to focus on safety. After much delay, the post of a member safety was created in the railway board but its role is yet to be clarified.

A couple of other positions have also been created but critically these are in the old mould, corresponding to functions, when it has long been suggested that the board should have members responsible for revenue segments, such as cargo, parcels and passengers. This change is difficult to bring about because the entrenched officers’ cadre in the railways are all powerful and change is resisted.

When the political leadership cannot overrule sectional bureaucratic interests, danger looms ahead. Historically, the Japanese bureaucrats who man individual ministries have been all powerful. It is argued that had things been otherwise Japan would probably not have played its proactive role in World War II. After the war when bureaucrats were asked how Japan came to play such a role, the reply was: That was the defence ministry’s war!