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The Railway Ministry has envisaged a regulatory body that will fix cost based tariffs, delink populist decisions, ensure adherence to contract norms, while developing the market share of the rail sector.
The Ministry in a concept paper has invited stakeholder’s comments on these proposals.
It has proposed that the regulator, Railway Development Authority, can be made functional through an executive order and subsequently strengthened by amending The Railways Act, which involves a process of legislation.
The regulatory body mechanism would ensure that the government steps in to extend financial support to Railways in cases where it does not accept the proposed tariffs.
The paper states that the railway development body will streamline the tariff determination mechanism. It will help fix tariffs rationally based both on cost-recovery principle and the level of tariffs that the rail traffic can bear. The move will help reduce the cross-subsidy within the railway users – in passenger and freight segments -- and improve the market share in freight.
The Authority would recommend passenger and freight tariffs, considering the cost structure (all direct and indirect costs such as pension liabilities, debt servicing, replacements and renewals), productivity parameters, market driven demand and supply forces and future investments.
“In cases where the Government does not accept the suggested tariffs, the Indian Railways would need to be compensated appropriately perhaps through increased allocations in the Gross Budgetary Support or through a suitable mechanism. This would bring in transparency and consistency in tariff setting, a fundamental parameter to encourage private participation and consumer satisfaction,” stated the concept paper.
In case the projected revenues do not materialise as considered by the authority at the time of tariff determination, the Ministry of Railways can approach the authority for revision of tariffs.
Defining track access charges and ensuring equal access on the dedicated freight corridor for all users – trains run by Indian Railways and other private operators -- is another mandate for the regulatory body.
The Authority would also have to ensure that the private parties and Indian Railways adhere to performance parameters as agreed in contracts. This would include the rolling stock maintenance agreements such as those entered into with Alstom and GE. In case of violation of these performance standards, Authority would suggest mandatory action to be taken by either parties and impose penalties for violations of obligations.
Given the role and mandate of the development authority, the Authority can take the form of an Appellate body. It would be an independent body, housed outside the Ministry but funded through the annual railway budget sanctioned by Parliament.
The approved Budget would be placed at the disposal of the regulatory authority. It would also be permitted to arrange funds through adjudication fees, penalties levied and any other source as specified in the proposed Act, the concept paper has suggested.
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