The Railways is faced with an intense fund crunch as its successive ministers have refrained from hiking travel fares, thereby bringing the monolith on the verge of bankruptcy. The decision to set up a Rail Tariff Regulatory Authority (RTRA) was taken by the NDA government in the final leg of its term. However, the plan did not find favour with the UPA.

In a note prepared for the government, highlighting the measures needed for improving the Railways’ fiscal health, the panel has mentioned reducing cross subsidisation within freight and passenger tariffs, through the setting up of an RTRA.

Railway minister Mamata Banerjee’s predecessor, Lalu Prasad, had during his stint rejected the plan panel’s suggestion. The former railway minister had argues that the setting up of an RTRA and putting a stop on new lines were unacceptable to his ministry. Banerjee herself is believed to not be too keen to set up such a regulator.

The Commission has argued that the most important policy distortion in the Railways was its lopsided tariff policy, which overcharges freight movement to subsidise ordinary passenger traffic. It had earlier pointed out that overemphasis on new lines for passenger traffic and inadequate thrust on expanding capacity in areas where there was potential commercial traffic was affecting the fiscal health of the Railways, the note states.

Railway ministry sources pointed out that the NDA government’s decision was taken without factoring in the views of the ministry, and was approved ostensibly under pressures from the finance ministry and the plan panel. Sources said that as there was no such regulator for road transport and highways sectors — where the volume of traffic is higher — there was no case for having one for the Railways.

The state-run giant is reeling under the impact of the Sixth Pay Commission, which has imposed a financial burden of about Rs 14,600 crores. As many as 145 projects have been delayed by several years, resulting in a cost overrun of an estimated Rs 40,000 crore. Its market borrowings have increased to Rs 9,170 crore to support the higher requirement of rolling stock. In view of this, the Commission has suggested that the Railways resort to mobilising resources by undertaking tariff reforms and also through an optimal mix of internal resources, borrowing, private participation multi-lateral funding and asset management.

Besides, the panel has also pitched for corporatising manufacturing and maintenance of rolling stock and outsourcing of activities like catering, production of coaches, wagons and locomotives. Lastly, the panel has also asked the Railways to mobilise additional resources and to induct efficiencies of the public sector, the note states.