India to establish independent rail regulator

India’s cabinet approved a proposal on April 5 to establish an independent rail regulator, which will be responsible for setting Indian Railways’ (IR) freight and passenger tariffs and ensuring a level playing field for stakeholders and investors.

an independent regulator for the Indian Railways that will be empowered to set fares. Except that its name will neither have the words 'independent' or 'regulator'.


The Rail Development Authority (RDA) - which will comprise a chairman and three members – will set efficiency and performance standards for IR on the basis of “global benchmarking parameters”. It will have the powers to engage experts from other fields.

The RDA is expected to revive investor sentiment, as it will ensure greater continuity on the railway when a change of government occurs.With the setting up of the regulator towards the fourth quarter of 2017, passenger fares on the IR network - which have remained hugely subsidised in recent decades - are also likely to rise.

The Railways Ministry, according to sources in the railway bureaucracy, has finalised the contours of an independent tariff and freight regulatory authority whose job will be to delink the fare and freight structure from political exigencies and at the same time resolve disputes and ensure a level playing field for private investors. 


With financial health of railways taking precedence, the draft says that if the government does not accept the tariff suggested by the regulator, it will have to compensate the organisation appropriately, "perhaps through increased allocations in the gross budgetary support or through a suitable mechanism". 

Losses in the passenger segment in the last fiscal year were estimated at Rs 320bn ($US 4.9bn).

“The setting up of the regulator means that the culture of populism will vanish and objective decisions in respect of freight and passenger tariffs will be taken,” an official said. “In all probability, passenger fares will henceforth be fixed on calculations of the Consumer Price Index.”
According to the Indian cabinet’s decision on April 5, an initial sum of Rs 500m will be set aside to establish the RDA, which will operate under the 1989 Railway Act.