FOR SOME TIME now pressure has been building up for Indian Railways to update its management structure to cope better with growing competition from road and air, and to improve the organisation’s financial health. Among recent calls for reform was a report prepared by the Confederation of Indian Industry at the end of last year that suggested giving IR more commercial freedom. Pointing to a long decline in market share of both passenger and freight traffic, the report sets out an 11-point programme for change.

The CII wants cross-subsidies to end and freight charges reduced at off-peak periods. It would like private sector involvement in the gauge conversion programme and in research and development, as well as in services such as catering. It also sees a role for private companies in property leasing and development. Extension of the electrified network would be welcomed by the CII.

More fundamentally, the CII believes that IR should be split into two organisations, one for infrastructure maintenance and development and the other responsible for operations. It suggested that IR should ’corporatise’ its manufacturing plants and establish joint ventures with international suppliers to ensure that IR keeps pace with technical advances.

Some indication of likely developments was evident from the appointment last month of a special committee to investigate and recommend ways of generating funds to modernise the 62809 km network. Opposition is growing to further attempts to raise money by increasing fares and freight tariffs. Speaking to the media in New Delhi last month, the committee’s chairman Sam Pitroda warned that he could offer no quick fixes to rejuvenate IR. He felt sure, however, that better management of assets and stricter control of stores and inventory would allow significant cost savings, and suggested that more open procurement policies would offer financial benefits. Pitroda considered that IR’s business units could be restructured as profit centres with internal accounts, although full recommendations on restructuring of the management would have to await completion of the committee’s work. Much greater use of IT may feature in the final report, but this will require considerable expenditure on staff training and equipment.

Pitroda may draw on some of the radical proposals drawn up in a draft report by the Rakesh Monan committee on railway reforms. One option may be for the government to set up a fund for railway projects by levying a special tax on diesel fuel, and discussions are under way between the railway and finance ministries. IR’s financial situation grew so serious last year that for the first time it had to borrow from the Unit Trust of India to meet salary and pension obligations.

Just whether the ministry and the railway management will be willing to tackle the thorny issues of staff productivity and IR’s many layers of bureaucracy remains to be seen.