Railway Restructuring

Rail vs. Road:

Does the advantage that was claimed for Railway over the Road exists even now?

Which has better support lobby Rail or Road?

Must we look at Rail vs. Road as competition? Can both not be complementary to one another?

Has technology been fully exploited by Road and Rail?

Growth of Railways has been restricted because the funds needed were large and no single source was big enough to finance the projects or was it due to non –viability that no one comes forward?

Are there examples of capital- intensive projects with returns coming much later, in other fields or industry, which have been willingly financed because the returns were better or risks were less?

How does the cost of creation of capacity and its operation compare between Road and Rail and has that been the reason for falling share of railways?

Does a reliable comparison of the costs exists between the modes and should not the governments work on that?

Modal Mix:

Is it possible to specify the ideal modal mix in transport? Who will be in the best position to set the target for the modal mix for the country? Is this the role of Railway organization or Government as a whole? Should the government be concerned about falling share of railway in transport sector? Does it not amount to market forces playing their role, and edging out the inefficient?

Is it the Government feeling guilty of not being fair handed in dealing with different modes of transport and hence intervening when one or the other falters?

Should not the modal mix depend on the relative economics of transportation with the break-even point shifting with changing relative economics?

Government Control of Railways:

Must the Railways be controlled by the Government, in order to serve the public service organization functions or the same purpose can be served by some other method than ownership?

Can subsidizing selected sectors or services or limiting the government ownership only to strategic railway lines serve the same purpose?

Is the keenness of governments to own the railways, in order to control the pricing policy for fares and freights and this evaporates when the losses mount and servicing the subsidies starts coming in way of other public service obligation initiatives?

Does using the railway system for furthering political agenda makes good economic sense?

Which is more important the ownership or control of services and investment opportunities?

Are there economies to be achieved by privatizing and making the organization function on commercial lines and are the governments aware of the benefits of such moves?

Restructuring Of Railways:

Is restructuring mainly the agenda of the World Bank and to some extent of the Railways and the Governments generally are averse to it?

Is the opposition to changes due to natural averseness or some thing more drastic than that?

Is it that the mangers and consultants not able to appreciate fully the issues involved in restructuring of the railways and the politicians are better positioned to understand the same?

When will change amount to restructuring? Can any small change be called Restructuring and if not then how will it be defined?
Will it be proper to say that change in ownership or substantial change by way of mergers and acquisition alone qualify as Restructuring?

Could the management itself be a party to oppose the change as they too will be displaced from their comfortable positions?

There are two sides to the issue of restructuring the one promoting the restructuring and the other that has managed so far and is defending. Can it be said that resistance will be proportionate to the extent the party concerned will be personal loser in the area of influence and benefits?

How suddenly so much interest in restructuring of Railways? Is it coming from the emphasis that World Bank has given to these issues or is it some other recent but more basic change such as technology? Is it basically the case of continued mismanagement resulting in the need for drastic change by way of restructuring?
Have the Railways been more prone to being mismanaged World over and if so why?
Could it be that long years of existence made most Railways too rule bound and unable to change to meet the demands of the consumer and face competition?
Could it be that railways due to the basic large size have become bureaucratic and the size itself makes them inefficient?

Restructuring Priority:

What is the greatest priority for Restructuring, Government ownership to be given up, freedom to fix fare and freight, introduction of competition, lack of financial support from the Government, or lack of profit motive for the organization?
Should projects (other than for social or defense purpose) be supported even if the marginal investment is not justified on IRR basis or ERR basis?

Restructuring Options:

Some experts believe that basically there are two major models of Rail Restructuring are being followed. One is maintaining vertical integration of the railroad enterprise with parallel railroads competing with each other, with source competition, which is the US model and the Canadian variant with mandated competitive access over short distances. Other examples being the Mexico, Brazil and Argentina.

The other model is using vertical separation, partial or complete. The examples are in European Union with non-integrated train operators competing with integrated railroad enterprises as in Netherlands
Or the other variant in European Union called the UK model with complete vertical separation. The examples are UK and Sweden. It is contended that failure of Vertical Separation has (Thus Far?) been due to impact on:

1 Economies of density: Economies of scale in train operation

2. Economies of scope: Benefits of joint operation of infrastructure and train operations i.e. coordination of operations (Coase) and maintenance and investment (Laffont and Tirole)

3. Economies of system size (Preston)

How does one react to these different forms of restructuring models and how does one select?

Technology Issue:

Have Railways already lost out on the technology and they are a sunset industry?

Is it that Railways spend less on research and technology development than most other industry?

Railway assets typically have long life, whereas the competing modes particularly the road sector can afford to take advantage of the changing technology by upgrading the assets. Railways therefore now suffer from the handicap of having long life assets, which in today’s scenario is a burden. Some experts quarters suggest half life half cost assets in order to upgrade assets much faster and take advantage pf the rapidly changing technology. This is not happening yet. Should this be considered a major handicap of the railways?

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