Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

Railway Reform: Toolkit for Improving Rail Sector Performance
Case Study: Indian Railways
tions by MOR (IRB) have improved business substantially (see Section 2), but
many Mohan Report criticisms have yet to be addressed and these are discussed
in Section 3.
1.2 Rail Sector Strategy
In December 2009, the MOR (IRB) published Indian Railways, Vision 2020, a
new sector strategy that embraces rapid growth and abandons the earlier idea of
incremental change. The objective is to reverse the erosion of rail freight modal
share, improve the quality of passenger services, and embark on the construction
of dedicated freight corridors and high-speed passenger routes.
Vision 2020 includes measures that aim to improve infrastructure over the next
decade to a greater order of magnitude than has been achieved in the previous six
decades. Vision 2020 would expand the network by 40 percent or about 25,000
kms; increase double- and multiple-track line from 18,000 to 30,000 kms; increase
train speeds on dedicated passenger lines from 110-130 km/h to 170-200
km/h; complete national gauge conversion; increase electrified routes from
14,000 to 30,000 km; complete the two main dedicated freight rail corridors; and
implement at least four, 350 km/h, high-speed rail corridors using PPP structures
for delivery.
Vision 2020 rejects the option of railway privatization in favor of enhancing the
‘effectiveness and accountability’ of IR through ‘necessary reforms at all levels’,
particularly internal corporatization and commercialization of activities. In the
strategy, PPP structures are slated for a larger role in the industry—in station development,
rolling stock manufacturing, logistics hubs, fiber-optic networks using
railway right-of-way, and major new infrastructure projects such as highspeed
rail lines and dedicated freight corridors.
Vision 2020 estimates that two-thirds of necessary investment, or US$300 billion
equivalent, would be mobilized from internal surpluses earned in projected
high-growth passenger and freight markets and from PPPs; the remaining onethird
would require a new government rail development fund. However, at the
time of writing, traffic growth has been slowed by global economic difficulties, a
PPP Policy has not yet been adopted, and Government has not yet committed to
establishing the development fund. Thus, Vision 2020 remains an unfunded
strategy waiting to be translated into specific projects and policies.
1.3 Purchase of Transport Services
No policy or system of explicit payments exists for loss-making passenger Public
Service Obligations (PSOs) in Indian Railways, but substantial internal crosssubsidy
takes place for train operations within the passenger sector, as it does
between individual ZRs. Also, most of the aggregate burden of infrastructure
costs falls on freight customers. Therefore, the MOR (IRB) has accepted internal
cross-subsidy of passenger services and an implicit tax on freight, rather than
direct subsidy, to fund passenger service obligations.
1.4 Industry Regulation
The MOR (IRB) is responsible for most aspects of railway economic regulation,
as noted earlier, but the Research Design and Standards Organization (RDSO),
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