Rush to disaster
The Modi regime’s move to restructure apex-level managerial positions
in the Indian Railways by merging diverse categories into a single service, undermining specialisation, is apparently aimed at facilitating
the wholesale privatisation of rail services.
THE Modi government’s reputation for using the shock-and-awe tactic to give the impression that it is doing something, anything at all, to address grave and mounting problems on multiple fronts is now well known. Demonetisation is the classic example, but the same tactic is now evident in the government’s response to crises in several sectors. Faced with the calamitous situation in public sector banks, driven to the brink by truant borrowers, it waved the magic wand of merging several of them in an obvious exercise in futility; still later, when the economic slowdown was fast moving towards a full-blown recession, it waived taxes for large corporates, a move that did nothing to bring the economy back from the brink. The latest recipient of this therapy has been the Indian Railways, India’s biggest enterprise by far, whose performance, simply by virtue of its size and scale, has the potential to provide the stimulus that is so badly being sought. Instead, on December 24, Union Minister of Railways Piyush Goyal announced an “organisational transformation” of the enterprise, which sent shock waves through the managerial cadre that runs it and those who understand the repercussions.
Goyal announced a complete overhaul of the Railway Board, the apex board that governs the Railways. He presented this as an imperative for building the Railways as a “unified” and “agile” organisation that is prepared to take on the “challenges” ahead. Missing in this was any reference to the government’s track record in addressing the multiple challenges arising from the
gross underinvestment in the critical sector in the Modi years. The announcement was significant for two reasons: one, a complete overhaul of the Railway Board, and two, a drastic overhaul of the Railways’ senior managerial cadre, most of whom are recruited through examinations conducted by the Union Public Service Commission (UPSC), the agency that recruits the creme de la creme of the Indian bureaucracy. The bombshell came with Goyal’s announcement that the existing eight streams of recruitment of Group A officers in the Railways, technical and nontechnical, would be merged into a “unified” cadre, to be called the Indian Railways Management Service. Goyal justified the move by referring vaguely to the culture of “departmentalism” in the Railways with officers working in “silos”. The announcement set off a firestorm of protests from officers across the country.
Railway officers from the civil services stream, numbering about 2,500 of the 8,400 Group A officers in the Railways from across the country, submitted a memorandum to the Prime Minister, the Railway Minister and several top bureaucrats opposing the move. More than 40,000 postcards were sent by officers and staff from across the country appealing to the government to rescind the move. Their immediate concern was what would happen to their career progression paths in a “unified” system. A senior officer from the eastern region, an Iittrained engineer who joined the civil side (not as an engineer) of the Railways about 15 years ago after clearing the UPSC exam, told Frontline that in a system of time-bound promotions, civil-side officers would suffer. “Those joining the technical services normally do so after obtaining their engineering degree, but those on the non-technical side are four or five years older when they join,” he said. This would place the latter class of officers at a disadvantage when their promotions are due in the new regime, if it is applied with retrospective effect, he argued.
Goyal claimed that the decision to “restructure” the Board was taken after a conclave of more than 1,200 officers was organised in December. However, an officer told Frontline that this was “a sham” because only 12 select General Managers, all from the engineering side, were allowed to speak at the conclave. This meant that a significant number of the managers were prevented from voicing their views. “How can this be called a consultative exercise when disagreements and apprehensions are not even allowed to be articulated?” asked the officer.
The Indian Railway Traffic Service Officers’ Association pointed out in a separate memorandum submitted to the Prime Minister that the move would discourage specialisation in the Railways, which would have adverse consequences for rail safety and organisational efficiency. It pointed out that a unified service would “compromise the system of checks and balances” that is inherent in the existing system. As a result, the scope for independent appraisal of demand projections, operational feasibility and financial viability of projects, all of which have huge financial implications, would be seriously compromised.
SPECIALISATION A CASUALTY
V.K. Agarwal, a civil engineer who has had the longest stint as Chairman of the Railway Board since 1970 (between 1997 and 2000), in a 14page note, dated January 14, to the Prime Minister, the Railway Minister and several top bureaucrats, pointed out that the daily operations of the Railways were akin to the armed forces operating during wartime, particularly in terms of the complexity of their operations. The Railways carry 2.3 crore passengers and 3.2 million tonnes of goods every day and employ more than 12 lakh personnel, all this on a nationwide basis, which implies that the expertise to handle this level of complexity simply does not exist in any other field. Agarwal cited the experience of the United Kingdom, where the government had to make a safety grant of one billion pounds to the privatised entity that bought British Rail, to make the point that privatisation may not be as rosy as it is made out to be.
There have also been suggestions that the Railways need to engage experts from the private sector as consultants in order to improve efficiency. This innocent prescription is completely off the mark in the case of the Railways. The skills learnt in the Railways’ environment are not available elsewhere for two reasons. One, there is simply no technical educational institution (let alone a university specialising in railway studies, as is the case in China) to supply these specialised skills. Two,
the Railways ensure training in multiple skills. This is proved by the fact that every metro rail project in the country has recruited personnel from the Railways; they simply are not available elsewhere.
Attempts to “streamline” the Railways bureaucracy have been made in the past, at least from the 1990s. Most notably, the Prakash Tandon Committee made this suggestion in 1994. Another internal committee report of the Railways, which has not made its way into the public domain, is available with Frontline. Authored by two former Chairmen of the Railway Board, J.P. Gupta and Prakash Narain, it expresses a firm objection to the “merger” of the officer cadre in the Indian Railways. The 1994 report, titled “Rationalisation of Management services on Indian Railways (1994)”, made several observations that debunk the logic of Goyal’s latest move. It pointed out that the UPSC would need to give a “combined merit position-wise list” for candidates taking different examinations in the relevant disciplines. However, it pointed out that the UPSC, for obvious reasons, would not be able to do this “with retrospective effect”. “Professionalism should never be put at a discount. Rather it should be further strengthened,” the committee observed in its report submitted to the then Railway Minister Jaffer Sharief. “Any arrangement which leads to the wholesale obliteration of the specialised functional streams would have disastrous consequences affecting the efficiency of the Railways and the safety of operations and human lives,” it asserted. Frontline has unearthed a response from the UPSC to the Railway Ministry dated March 13, 1995, which addresses the cadre merger issue. Significantly, the arguments used in it correspond to the objections raised by the Guptanarain Committee, confirming that the UPSC’S views remain time-agnostic.
What could be the motive of the Goyal exercise, especially when it is clear that the “merger” of officer cadre is bereft of any rationale? The argument that this would save the cadre from the scourge of “departmentalism”
or of operating in silos does not make any sense because anyone with a basic understanding of any large enterprise—public or private—knows that “rivalries” within departments are a fact of everyday business life. But the ability to engage in a “rivalry” is exclusive to those who wield power. After all, a foreman in a shop floor hardly has the agency to engage with rivals, whereas a company director has the wherewithal to do so. Thus, rivalry, by definition, has meaningful consequences only at the upper echelons of an enterprise. Then why upset an entire chain of command in order to rein in a few at the top who engage in turf wars? Tellingly, by implication, this also means that Goyal has not been successful in running his Ministry.
The reconstitution of the Railway Board has ominous implications, considering the direction in which the Railways are proceeding under the Modi regime. In keeping with the new-found zeal to “corporatise” the Railways, the Chairman of the Railway Board will be redesignated as Chairman and CEO, while the strength of the Board will be halved from the current eight (apart from the Chairman); each member will be responsible for specified functions. Significantly, the Board will not have a dedicated member attending to staff functions, as has been the practice. This is curious given the size of the workforce (about two-thirds of all expenditure is on staff). The sting in the tail lies in the proposal to induct “distinguished” “independent” experts from various fields who have experience of over 30 years in their areas. The fear that this would open the revolving door to those from private industry looking to promote vested interests from within the Railways is not an idle one.
PERILS OF PRIVATISATION
The Modi government’s track record shows that it is willing to recklessly proceed on the road to privatisation. Each of its initiatives has been controversial, reflecting the regime’s egregious disregard for due process. Take the case of the decision to hand
over 150 passenger trains to private operators. Questions abound about the terms on which these operations have been handed over. A senior Railway officer told Frontline that the profit margin in running the trains, with unbridled fares, would be at least 100 per cent more than what the Railways charge passengers. What are the terms on which the private operators are allowed to run these trains and profit from using assets—tracks, stations, signalling—that belong to the Railways? Since the private operators are supposed to guarantee time schedules to prospective passengers, how much of their own traffic would the Railways need to vacate from tracks in order to ensure priority to private operators? And, what would be the magnitude of the losses to the Railways’ revenues as a result?
Moreover, many of these private trains will run on the most congested sectors of the railway network. A Railway officer of the Traffic Services cadre told Frontline that dozens of trains run by the Railways have been cancelled in the last three months on the congested Allahabad section because of fog. “The running of private trains along such routes would result in the Railways leaving its own passengers stranded in order to accommodate privately run trains,” he said.
The initial public offer (IPO) of the Indian Railway Catering and Tourism Corporation (IRCTC) made last year was portrayed in the media as a runaway success. In reality, the government incurred significant losses because the share was priced too low. A source in the Railways told Frontline that the Railways had twice suggested a much higher floor price; on both occasions these were shot down by the Finance Ministry, which felt that there might be no takers at a higher price. The floor price was set at Rs.320 per share, but on the day of listing it opened at Rs.644, a 100 per cent increase on its debut. In less than two weeks, the stock price trebled, and on February 5, it reached a peak of Rs.1,547.80, a fivefold increase in less than four months. The issue was oversubscribed 112 times in an overall weak market. The primary beneficiaries of this ill-fated float were institutional and foreign investors and mutual funds. The IRCTC not only has a monopoly in ticketing and catering but also sits on a gold mine of data that in the hands of private control opens up the possibility of data abuse. Following the Union Budget, on February 5, the IRCTC share peaked at Rs.1,547.80, clearly buoyed by the “animal spirits” awakened by the Finance Minister’s desperate resolve to sell national assets at any cost.
Yet more sales are in store. The Container Corporation of India (CONCOR), a monopoly in rail transportation of containers, is now up for strategic sale. It not only moves containers but operates terminals and warehouses. That is, it offers end-to-end solutions in business parlance.
Railway sources told Frontline that Adani and Reliance, among others, are eyeing the sale. Yet more questions about the propriety of the sale abound. Why would the government want to sell a strategic logistics asset, especially when it has a commanding presence in the sector? More critically, CONCOR’S presence enables the government to keep tariffs in check; once it loses its current status, tariffs will surely increase. If and when that happens, the government will lose all leverage in ensuring control on logistics costs, which surely has a critical bearing in India’s competitiveness in world markets. The government plans to give the “strategic” buyer of CONCOR complete control with a stake sale of 36 per cent of the company. Significantly,
the private buyer would be able to start operations with a profit margin of at least 30 per cent, which the Railways now make from the business but which they use for crosssubsidising other operations. The icing on the cake would be the Rs.40,000 crore worth of government land that CONCOR holds.
A similar fate awaits the Centre for Railway Information Systems (CRIS), which currently designs, develops and implements the critical information systems in the Railways. In an outrageous move, the CRIS is to be merged with Railtel, the broadband and Virtual Private Network service provider to the Indian Railways, before the latter is listed. This is obviously being done with the intention of increasing the market value of the Railtel sale. Apart from the questionable nature of the deal, the sale of the entity to private players raises worries about the possibility of the huge volume of data—2-3 terabytes per minute—being mined and opened to abuse in private hands.
What explains the bizarre proposal to “merge” officer cadre in the Railways? Indeed, the idea seems so fraught with pitfalls that there is a possibility that it may be given up later. A source in the Railways said that the idea was already being reconsidered at the highest levels. Or, the proposal may be used to ensure that dissent in the officer cadre, especially to the privatisation agenda, is quelled by using this as a threat.
It is evident that the Modi government’s move to “restructure” the apex levels of the managerial cadre in the Railways is driven by its desire to purge dissenters within existing structures. Its reckless pursuit of privatisation, without any pretence of due process, would be made possible with the entry of private honchos into the Railways at their apex. The former Railway Board member cited earlier told Frontline that the aggressive pursuit of privatisation threatened to reduce the Railways to the status of a “glorified contractor”. “Act first, think later, seems to be the motto in government these days,” he quipped. $