The Economic Times Title : ET Exclusive - Govt Considering a Railway Regulator Author : Location : NEW DELHI Article Date : 08/14/2014 Body likely to settle any issues between investor and railways, may be asked to fix passenger, freight tariffs The government is considering the establishment of an independent regulator for the railways now that the sector is being opened up to overseas investment as India looks to strengthen its rail infrastructure, especially since the attempt to attract domestic private money in some areas hasn't been too successful thus far.

The Cabinet approved foreign direct investment (FDI) in railways along with defence at an August 6 meeting during which a regulator was discussed. The government also wants a transparent model that will make such investments attractive to private investors with clearcut clauses on recovering money .

Existing domestic private investors in approved projects aren't too happy -complaints of unfair practices and high-handed officials are rife.

“The regulator will settle contractual disputes and any unforeseen issues that may arise between the investor and the railways,“ a senior railway official told ET. The same regulator may be given the task of fixing passenger and freight tariffs.

Railway minister DV Sadananda Gowda announced the FDI plan and encouragement to public-private partnerships (PPPs) in his July 8 rail budget as part of proposals aimed at generating funds to strengthen the mammoth, crumbling network.

A massive amount of money is needed to fund ongoing and future rail projects, with the Golden Quadrilateral Network alone requiring an additional `9 lakh crore, while each proposed bullet train will need an investment of `60,000 crore. The Cabinet approved 100% FDI in suburban corridors, high-speed train systems and dedicated freight line projects implemented as PPPs.

Several railway officers and experts doubted that investors would find the sector attractive under the current circumstances. “The railways have failed to get domestic private investors due to their unwelcoming work culture and atmosphere. Those who did invest ini tially ended up regretting their decision and vowing never to get into a working relationship with the railways,“ said a senior railway official who has dealt with several disgruntled investors. He cited the example of container terminals set up under a policy initiative in 2007 by then rail minister Lalu Prasad.

“Fourteen people were given licences to develop the terminals, including wagons, tracks and the rolling stock. When it was done and they started earning some profits, railways changed the goalposts and restrictions were imposed. They were told, for example, that they could not transport foodgrain and coal,“ the officer said.

The railways did the same thing in private freight terminals. When private investors started making profit, the railways changed the policy to appropriate this for itself. Other policies ensured that projects were rendered useless, according to investors. Under the Wagon Investment Scheme of the railways, Jindal Rail Infrastructure set up a factory in Vadodora to manufacture specialised wagons to carry automobiles.

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“ It has been five years since the wagons were rolled out but not even a single one has been used yet because of the railways' tedious bureaucratic procedures,“ the officer said.

The station development programme using the PPP model also failed. Four railway stations -New Delhi, Bijwasan, Anand Vihar and Chandigarh--were identified to begin with but the railways have not got any money under this plan in the past four years. “Nobody wants to do business with the railways,“ another railway official said. “If the railways are serious about getting private investments -domestic or foreign -they need to do it fair and square.“

A regulator should go a long way toward sorting out such issues. “The only avenue for private investors who feel cheated by the railways is the competition commission. The commission goes strictly by the contract, where the fine print provides a lot of leeway to the railways,“ the official said.

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