The Hindu Business Line : On right track

THE DECISION TO allow private players enter rail container freight service, ending the monopoly of the majority Railways-owned Container Corporation of India (Concor), is welcome in more ways than one. From a public policy perspective it is certainly not a good idea to continue sustaining a monopoly whose ownership is partially private. Inevitably, questions will be raised about how much of that entity's performance is attributable to the special status and whether public policy should be structured as to favour owners of private capital for no discernible public purpose. When the entity extracts super normal returns on the capital employed or when the composition of ownership of such private capital is predominantly foreign, the policy dilemma only gets more acute. And Concor appears to possess both these features.

Concor returned nearly a third of its investments in profits on an annualised basis, in the first half of the current fiscal, which should place it among the most profitable companies in the country. And, its private shareholders are largely foreign institutional investors. Of course, the other, and more obvious, policy implication is the prospect of a wider choice of service providers with the positive cost implications and efficiency gains stemming from heightened competition. The decision is also likely to trigger operational improvements in the economy as a whole. A number of private ports have sprung up in recent times and container terminals in the publicly-owned major ports have been privatised and capacities expanded. But in the absence of a clear-cut policy on entry of competition in container freight movement neither could these investors think in terms of integrating forward with inland transportation of maritime cargo nor could the congestion in railway network in specific corridors be relieved through a more efficient re-routing of such goods. The new policy, thus, opens up the prospect of efficiency gains all around.

Though the latest policy stance marks a significant shift, the concept of a public-private partnership is not altogether novel. For many years there have been schemes for owning railway wagons, laying lines on `build-operate-transfer' basis, and so on. But these have had only limited success. In the event, the policy would do well to address some of the more critical challenges that undermine the capacity of the economy to be globally competitive. Specifically, the Railways badly needs to make investments that would debottleneck its existing assets to generate more returns even as it goes about radically restructuring its business for sustainable long-term growth. The Railways ought to have over the years set a better pace vis-à-vis the economy, in keeping with its status as a catalyst of growth. But the Railways ended up trailing the economy, leading to its ceding market share to the road sector. This has to be corrected in the larger interest of shoring up the competitive capability of the economy.