Cabinet clears independent regulator to fix rail fares

The union cabinet on Wednesday approved a proposal for setting up an independent regulatory agency for the Railways, which will recommend revision of tariffs more on economic considerations rather than political biases.

The regulator will have only recommendatory powers, but the move will help make the process of revision of both passenger and freight fares transparent.

The decision, which comes after the merger of the railway budget with the Union Budget, is expected to a revision in passenger fares, which are at present highly subsidised.

Freight rates, on the other hand, are likely to come down as the higher passenger fares would help offset costs, officials said.

The railways have has suffered as successive governments shied away from taking the "unpopular" decision of increasing fares for more than a decade, costing the Railways around Rs36,000 crore every year in passenger subsidies alone.

"The regulator will lay down principles and rules for determining tariff in passenger and freight segments in a transparent manner," said an official.

The regulator will also lay down standards for efficiency and performance which will lead to customer satisfaction in both passenger and freight services. An official said the authority will also be mandated to check deviations, if any, from the laid-down performance standards and suggest remedial measures which will empower customers - both passengers and freight operators.

The authority will also suggest guidelines for determining track access charge which will ensure better utilisation of dedicated freight corridors.

A regulator outside the political process will help attract private investments in railways by ensuring fair play and a level playing field for private or foreign players.

"It will also frame principles on subsidy or social service obligations benefiting the aam aadmi as the higher income group will have to support services for the common man."

"The authority will be empowered to make suggestions on policies for private investment, to ensure reasonable safeguards to PPP investors and to resolve dispute regarding future concession agreements," said an official.

The authority will also suggest guidelines for determining track access charge which will ensure better utilisation of dedicated freight corridors.

The authority, to be set up by 1 August this year, will have a chairman and three members and can engage experts from different areas. The government chose the executive order route to ensure setting up of the regulator at the earliest, said an official. The independence of the regulator will be ensured through a separate budget and a stringent appointment and removal process for the chairman and members.

The appointment will be made by the centre from the panel of names recommended by the search-and-selection committee headed by the cabinet secretary and the rail board chairman, DoPT secretary and chairman of any other regulatory agency nominated by the cabinet secretary as members.