Independent Regulator in Railways

Long-overdue reforms in the structure and functioning of Indian Railways, its finances, tariff
fixation, investment plans, and project implementation will be speedily implemented. All noncore activities will be corporatized with their own effective board management. Critical projects
will be re-designed to attract non-budgetary and private investments. The huge value hidden in
the assets of Indian Railways, and in its under-utilized capacities, will be realized. Devolution of
powers to zonal and lower levels will be effected. An independent Rail Tariff Regulatory
Authority will be set up on the lines of the Central Electricity Regulatory Commission.

ets go back to the basics. The Indian Railways makes its profits from transporting freight, and
these profits are used to subsidise the passenger business. Yet, freight trains get stepmotherly
treatment from the Railways. They are not timetable trains and spend possibly 50% of their
travel time hanging around for the lines to clear. No wonder 70% of freight traffic has shifted to
roads, even though road transport is more expensive and less environment-friendly.

Hence the concept of Dedicated Freight Corridors (DFCs), railway lines only for freight trains,
connecting important commercial centres of India. This is the most crucial project that the Indian
Railways are working on right now, yet Gowda mentioned it only once in his speech.

Two of the six corridors plannedthe Western DFC (Delhi-Mumbai) and the Eastern DFC
(Ludhiana-Kolkata)are targeted to be commissioned by March 2017. The ports in the Western
region covering Maharashtra and Gujarat will be efficiently linked to the northern hinterland, and
coal would move rapidly to the power plants in the north, and steel to the industries.

The DFCs will have a massive impact on the Railways profitability, and the entire Indian
economy. The average speed of freight trains will go up from 25 kmph to 70 kmph which will
reduce the transit time from the present levels. At the same time, DFCs will allow higher axle

loads per carriage and much longer trains. And the beauty of it is that the project will pay for
itself because of the obvious advantages it would offer.
(http://www.sandipanonline.com/2014/07/ )

Now for private investment in the railways. Public-private partnerships (PPP) have not taken off
at all in this sector. The simple reason is that Indian Railways is owner, regulator, judge, jury,
arbiter, all rolled into one. Unless an independent Railway Regulatory Authority is set up, which,
among other responsibilities (including tariff determination on an economically rational basis),
will also ensure fairness in dealings between Indian Railways and PPP participants in projects,
the better class of private sector companies would not be interested.

Gowda is willing to allow foreign direct investment (FDI) upto 100% in railways, other than
operations. But which foreign firm will invest in an entity which has no credible accounting
standards?