Splitting the Railways into two parts

K Yatish Rajawat

indian_railway720D V Sadananda Gowda on Tuesday made a very innocent sounding announcement which the opposition or even his own party members did not notice. The Railway Minister in his budget speech has effectively announced he will split the Railways into two parts from the top down. He wants to split operations from project implementation at the Railway board level.

Railway board is an all-powerful body in Railways it has members from each department of Railways and has the final say in all decision making. It is like an executive board of a company that takes all the decisions. It has six members representing electrical, staff, engineering, mechanical, traffic and a financial commissioner, the six functional areas of Railways. The board is headed by a chairman who reports directly to the Minister of Railways. Besides looking after the operations of Railways, CEOs of all Railway PSUs report to the board. A little lower down the hierarchy, operations of railway are run by the general managers heading different zones. The zones are further divided into divisions headed by a manager who is responsible for all the operations, projects, revenues and costs. A Divisional Railways Manager (DRM) is supposed to manage and maintain a balance sheet for his division. His performance is judged on the basis of his safety record, utilization of budget, freight and passenger targets and completion of projects in his division. Completion of projects is judged on the basis of utilization of the budgetary grant by the board to the division.

Therefore the outlook at division level is not completion of projects but utilization of funds. A lazy DRM would not like any budgetary allocation for new projects as it is additional work over and above his operational role. A corrupt DRM would seek higher budget and fritter it away without completing the projects. This is the management conundrum that plagues the Railways. One of the many reasons that Railways’ cannot complete projects on time. According to the Railway Minister, “In the last 10 years, 99 New Line projects worth ` 60,000 crore were sanctioned out of which only one project is complete till date.”

Gowda also says, “The Railway Board, due to overlapping roles of policy formulation and implementation, has become unwieldy. Therefore, I propose to separate these two functions. Railways have been suffering heavily because of time overrun and cost overrun due to poor project management.” Unwieldy, is a strong word and shows the frustration of Gowda or his advisors.

It shows that the top three tier layer made up of the board, zones and divisions is not the best for Railways. All financial decisions, for hundreds of projects, are made by the board with no single member responsible for any single project. The responsibility for projects is diffused at the top and not considered important at the execution level.

Which is why Gowda, says, “In order to overcome delays in project execution, I propose to set up Project Management Group at the level of Railway Board. Similarly, to expedite the projects at the ground level, a Project Monitoring & Coordination Group consisting of officials of State Government, Railways and professionals will be set up.

If a Project Management Group (PMG) is set up at the same level as the Railway board, effectively it splits the Railways into two parts. One part that is responsible for projects and the other that is responsible for operations. In a way capital expenditure and operations have been split. This is the biggest change that has taken place in the structure of Railways since it was set up.

Typically, companies also create a project management team that is separate from the operational team when it is going for any greenfield project. If splitting the Railways is not enough, Gowda also has a view on the priority of the projects. He has selected 30 projects as a priority, though he did not spell out the projects. In his speech he spoke at length about improving passenger amenities but they are not really revenue accruing projects. They are populist as passenger fares do not support the Railways it is freight that keeps the wheels moving.

At the same time it was heartening to note, when he said, “It is investment in doubling and tripling to decongest the over-utilized network, which brings money to Railways….. construction of new lines, most of the times do not even meet operational cost as there is no commensurate demand.” If this is going to be his philosophy for selecting projects for completion then there is hope for Railways.

Splitting the Railways and creating PMG or a project management board is not going to be easy. It is going to take enormous political and management skills to force it through the Railway bureaucracy. None of the board members are going to like that their powers truncated into half and the profitable half at that. But this is what the Railways needs and the country really needs logistics infrastructure that only the Railways can build.

More power to this restructuring and hope it delivers the results.

(K Yatish Rajawat is a senior journalist. He is the founding Editor in Chief of Business Bhaskar (Hindi) and former Managing Editor of Dainik Bhaskar group. In a span of close to two decades he has worked with Economic Times, Businessworld and The Hindu Business Line newspapers. He tweets at @yatishrajawat)