Railway Ministry To Soon Seek Cabinet Approval For Proposed Regulator
An independent regulator for railways?
The railway ministry is likely to table a note over the next fortnight seeking the Cabinet’s approval to set up the Rail Development Authority, a government official told BloombergQuint on the condition of anonymity. A proposal to this effect has been sent to different ministries for consultation, the official added.
The proposed regulator will fix fares, promote competition, protect customer interest and determine efficiency and performance standards.
The proposal to set up a rail authority was first announced by Railway Minister Suresh Prabhu while tabling the Rail Budget for 2015-16.
We hope to have the draft bill ready after holding extensive stakeholder consultations. The independence of the institution is sought to be ensured by way of a transparent and streamlined selection process and keeping at arm’s length from the Ministry of Railways.Suresh Prabhu, Railway Minister in Railway Budget Speech, 2015-16
In January this year, the ministry had issued a concept note on the matter. The Rail Development Authority will be an independent body, with its office outside the Ministry of Railways, and will be funded from the annual railway budget sanctioned by the Parliament, according to this concept note.
It is proposed that the Rail Development Authority may be established through a legislation by amending the relevant section of the Railways Act. A new chapter called ‘Rail Development Authority of India’ will be added vesting the authority with powers necessary to discharge the requisite function.Concept Note by Ministry of Railways
After the decision to merge the Railway Budget with Union Budget earlier this year, the Parliamentary Standing Committee on Finance, in a meeting with finance ministry officials, had once again recommended a regulatory body which would help the Indian Railways fend for itself.
It has become important to set up an independent regulator, especially after the merger of the Railway Budget with the Union Budget, a member of the Parliamentary Committee on Finance told BloombergQuint. This would ensure that the financial autonomy of railways is maintained, he added.
"With the finances of railways not in great shape and demand for its services high, the role of this new body becomes very crucial. But one caution is that this body should consist of only technical and domain experts,” NR Bhanumurthy, a professor at the National Institute for Public Finance and Policy, a think tank affiliated with finance ministry said.
The caution springs from the fact that this body may need to look at two politically contentious issues, include fixing fares – both passenger and freight – as well as introducing new trains, he added.
But the extent of the regulator’s powers is yet to be full defined.
"We will need to wait and see if the Railway Development Authority’s views on ticket and freight charges will be of a binding nature or a recommendatory nature. In my view, in both cases, it will be beneficial for the railway system in India as it will usher in an objective assessment on the railway tariffs," said Rajaji Meshram, director of infrastructure and government services at KPMG.
Accounting reforms are a priority area for the railways and having a strong accounting system is a pre-requisite for a regulatory body. Thus, the Rail Development Authority will hasten accounting reforms in railways and this will enable the cost streams to be clearly visible. Visibility and monitoring will eventually lead to efficiency, he added.