The Union Cabinet gave its nod last week for the setting up of the Rail Development Authority (RDA).
What is RDA?
It will function as the regulator for Indian Railways.
It will be required to give its recommendations to the government across many policy decisions, especially in fixing tariffs.
What is the need?
The railways have been struggling on almost all counts.
Passengers - Though the fares have not been hiked much, the quality of service has remained inferior.
Freight - The cross-subsidisation of passenger fares with higher freight has undermined the railways’ finances and it became less attractive as a transporter of goods.
The railways compare unfavourably with airlines for long-distance passenger travel and with road transport for shorter journeys.
The central problem has been the lack of political will to take hard decisions like timely and targeted tariff revisions.
This called for a dire need of an independent body that could work based on commercial principles.
In 2014 National Transport Development Policy Committee (NTDPC) noted that the centralisation of all functions in the Railway Board has proved detrimental to its growth.
So to reverse the trend of declining rates of growth in railway freight revenues and volumes, it recommended an Independent Body.
What was the delay?
The desirability of such an authority was first outlined in 2001.
But the government could not secure legislative backing for the regulator.
Eventually now, it has been set up by an executive action.
What should be done?
RDA’s recommendations on tariff and fares are not binding on the railways.
This will retain the freedom of railways to set the fares it wants to charge and allow the railways to strike a balance between having expert guidance on technical issues.
The real reform in the railways will happen when the regulator creates a competitive environment among the different zones, and allows them and private players to run trains at a cost-plus formula.
