Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

Railway Reform: Toolkit for Improving Rail Sector Performance
Case Study: Indian Railways
cepted in most economic sectors and in most countries. Instead, modern business
eschews these structures on the grounds that they barricade institutions against
encroachment, discourage innovation by new participants, undermine market
focus, and inhibit commercial instincts. The Indian experience does little to contradict
the theoretical structural weaknesses of the monolithic railways structure.
Despite several ad hoc initiatives, the overall degree of private sector participation
is currently low by international standards. However, MOR (IRB) may adopt
a policy to encourage private sector participation in core and non-core railway
activities, which would reduce the industry’s monolithic nature. It remains to be
seen whether policy change in favor of private sector participation will result in
the institution embracing a more pluralistic industry.
The infrastructure challenges facing IR were set out by MOR (IRB) in Vision
2020, but building the political will, technical capacity, and financial sources to
attain Vision 2020 has barely begun and the risks of deferral or dilution appear
substantial. Moreover, while Vision 2020 provides a bold and positive vision of
new freight and passenger lines, the equally difficult problem remains unaddressed,
of the little-used non broad-gauge network–over 11,000 route-kms or
about 18 percent of the total IR network—which carries only 1.0 percent of total
IR traffic.
The IR challenges set out in the Mohan Report include the lack of clear purpose,
confusion between commercial objectives and social roles, and politicized decision-making
that hampers commercial focus. Beyond the measures that have
since been taken, Mohan suggests that government policy functions should be
separated from commercial operations, non-core activities should be spun off,
and commercial management on lines of business and market segments should
be refocused.
Since the 1989 Railway Act, India’s economy has been modernized and transformed
by more open international trading relationships, greater reliance on
market forces, a stronger role for the private sector, and greater competition in
trade and services. Now thirty years on, and based on performance as well as
governance principles, it is appropriate for India to consider whether its railway
sector’s traditional institutions remain in the best interests of India’s new economy.
The World Bank Page 361