Financial Daily from THE HINDU group of publications
Wednesday, Jul 24, 2002
Logistics - Railways
New Railway zones Setback to reforms and efficiency
S. D. Naik
THE fierce battle between Ms Mamata Banerjee and Mr Nitish Kumar over the bifurcation of the Eastern Railway zone in Kolkata to create a new East Central zone at Hajipur, Bihar, has taken an ugly turn. The issue has now become a Bihar versus West Bengal controversy with politicians from West Bengal opposing the move and those from Bihar saying the reversal of the bifurcation would not be tolerated.
MPs of the Samata Party, the NDA's ally, have threatened to resign from the Vajpayee Government if there was a change in the decision to set up zonal headquarters of East Central Railways at Hajipur.
Earlier, Ms Mamata Banerjee had threatened that she would not allow Parliament to function if the decision was not reversed. Thus, with the complete politicisation of the Railways, considerations of the system's economic efficiency and overall national interest have taken a back-seat.
Not surprisingly, some experts have expressed the view that the Indian Railways, a true symbol of national integration, may turn out to be a tool for national disintegration, if the rampant political populism is not checked in time.
That the rival factions had to seek the intervention of the Prime Minister and the Deputy Prime Minister to resolve the differences and the issue had to be referred back to the Cabinet for review is a sad commentary on the country's Railway system.
Successive Railway Ministers have indulged in political populism to gain political mileage and frittered away the system's scarce resources on unproductive expenditure. Whether it is gauge conversion, electrification, announcing of new uneconomic projects or the creation of new divisions, the guiding factor has most often been the personal ambition of the Railway Minister rather than the project's economic merit.
When Mr Nitish Kumar succeeded Ms Mamata Banerjee, it was hoped that he would concentrate on Railway reforms and try to put the ailing system back on track. However, this hope was belied the moment he signed the notification for the creation of five new zones and eight divisions taking the number of new zones to seven, including East Central at Hajipur (by dividing Eastern Railway) and North Western in Jaipur (by dividing the Northern Railway). With this, the total number of Railways zones has risen from 9 to 16.
It has now come to light that the Railway Minister ignored the Railway Board's advice on new zones. The Board had prepared a Cabinet note on the issue in November 2001 giving reasons why the proposal to create new zones was not practical. It had also pointed out that the new zones would impose a recurring expenditure which it could ill-afford on the Ministry.
The Comptroller and Auditor-General (CAG) has also pointed out that the creation of new zones would in no way add to the system's operational efficiency of the system. According to the Railways' own data, apart from aggravating the financial stress on the cash-starved Railways, the new zones would increase the crossover time for goods trains by at least an hour while changing zones. Thus, the operational efficiency of the Railways would actually go down because of the new zones, even as the working expenses go up exorbitantly.
The H. C. Sarin Committee on Railway Reforms, which had gone into every aspect of the matter and produced 26 volumes in the 1980s with the help of 22 sub-committees headed mostly by retired Railway officials, had recommended the formation of only four zones and spread over three phases. The Committee was emphatic in its observation that ethnic, linguistic, territorial or other such considerations should not be taken into account while considering the formation of new zones or divisions.
However, driven by these very considerations, Mr Ram Valas Paswan, during his tenure as Railway Minister, drew up a number of uneconomic schemes involving huge additional expenditures without revenue gains. Instead of initiating measures to reduce the surplus staff, estimated at 4 lakh, he regularised the services of casual workers and raised bonus payment ceilings.
Not content with these measures, he announced the creation of new zones in 1996 in total disregard of economic and efficiency considerations. All he wanted was to derive political mileage. However, the proposal remained in cold storage for all these years because of the funds crunch.
Even Ms Mamata Banerjee, well-known for her politics of populism, did not press ahead with the proposal to create new zones during her tenure in the Rail Bhavan. Perhaps even she was convinced of the proposal's unreasonableness.
Against this backdrop, there was really no need for Mr Nitish Kumar to show such haste in announcing the decision to create new zones under the pretext that he was only implementing a 1996 Cabinet decision. Instead, he could have referred the proposal back to the Cabinet for reconsideration in view of the financial crisis faced by the organisation and the urgent need to give preference to the huge backlog of ongoing projects worth Rs 35,000 crore and improve the system's operational safety.
The creation of so many zones is clearly bad economics and would result in a severe setback to the process of reforming the Railways. As Mr R. C. Acharya, a former Railway Board member puts it: "The Railways is all about the `long haul'. Its strength lies in economies of scale. Further, the advent of IT has now ushered in an era of unified command and control over far-flung areas from a central point. Hence the proposal to balkanise the Indian Railways into more zones may turn out to be a disaster in the making."
In this context, six former Railway Board chiefs Messrs Kripal Singh, M. N. Bery, M. S. Gujral, M. N. Prasad, Y. P. Anand and Anand Shukla have termed the bifurcation of the eastern zone as `Hajipurisation' of the Indian Railways.
In fact, in a strongly worded letter to the Prime Minister, Mr Atal Bihari Vajpayee, and the Deputy Prime Minister, Mr L. K. Advani, they have opposed the idea of creating seven new zones for the country's biggest undertaking at a time when international giants such as Boeing, BMW and Rover, Hewlett-Packard and Compaq are entering into mergers to improve efficiency and cut costs.
They argue: "The decision to create new zones, starting with the dubious Hajipur experiment (by Mr Paswan), is a populist, parochial and political overture. It will be an operational debacle, a financial disaster and an administrative blunder."
Citing CAG reports, the Standing Committee of Parliament on Railways, the Railway Convention Committee and the Expert Committee constituted by Mr Nitish Kumar, which opposed the move, the former Railway Board chiefs said, more zones would be an unmitigated disaster from the operational viewpoint.
Another former Railway Board Chief, Mr Ashok Bhatnagar, has also termed the move to create new zones imprudent at a time when the system is starved of inputs and the Railways is trying to tap all possible avenues to raise resources to meet the demand. He has questioned the wisdom of committing funds of Rs 1,400-1,600 crore to a non-developmental and unproductive venture. In his opinion, the real public service would be to reverse the decision as soon as possible.
Addressing his Advisory Council on Trade and Industry recently, the Prime Minister has stated that the Government would speed up economic reforms. He further indicated that a big initiative is also on the cards for the modernisation of the Railways.
Clearly, in any scheme of infrastructure development, the modernisation and corporatisation of the Railways would have to receive very high priority. The success in this area would depend largely on the Government's resolve and determination in ending political populism and wasteful expenditure.
Already the rising operational costs, overstaffing and gross mismanagement have landed the system in a financial mess. The operating ratio of the system (the day-to-day working expenses as a percentage of gross traffic receipts) has already touched 99 per cent compared to 82.5 per cent in 1995-96.
Against this backdrop, it needs to be stressed that the Cabinet review should not be confined only to examining the bifurcation of the Eastern Railways zone but should also include a detailed review of the 1996 decision to create new zones.
The Prime Minister and the Cabinet should not hesitate to reverse the decision in the larger interest of the Railways and the nation.
Considering the deplorable track record of successive Railway Ministers, it is time the Prime Minister asserts his authority and intervenes to ensure that the system is guided by expert advice and not left entirely to the whims and fancies of individuals heading Rail Bhavan.
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