Form & Reform

Track Record (Continued)

Bibek Debroy is chairman of the Prime Minister’s Economic Advisory Council
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Indian Railways as a work in progress

IN THE LAST column, I made the point that to understand India’s railway system today, one has to remember the past. Let me continue where I left off. Circa 1870, several links of the country’s trunk routes were falling into place. GIPR (Great Indian Peninsular Railway) connected Mumbai to Nagpur and Mumbai to Jabalpur. Meanwhile, EIRC (East India Railway Company) built the Howrah-Delhi line via Allahabad. Once there was EIR’s Allahabad-Jabalpur line in 1867 and GIPR’s Mumbai- Jabalpur line in 1870, the Howrah-Allahabad-Mumbai line could be opened in 1870. Around the World in Eighty Days was published in 1873. Phileas Fogg reached Mumbai ahead of schedule and bought a ticket from ‘Bombay to Calcutta’. However, despite what newspapers in London had reported, the conductor said: “The railway isn’t finished… The passengers know that they must provide means of transportation for themselves from Kholby to Allahabad.” That’s how Fogg got to hire an elephant. It isn’t clear where Kholby was—probably somewhere near Satna. The news of the Howrah-Allahabad-Mumbai railway line being opened was important enough for it to have reached Jules Verne. Bengal Nagpur Railway (BNR) was established in 1871 and it was then that parts of West Bengal, Odisha and Chhattisgarh got connected through railway networks. One of the purposes behind setting up BNR was a shorter Howrah-Mumbai route.

That Howrah-Allahabad-Mumbai line was inordinately long. Everyone knew that and this brings us to Howrah- Nagpur-Mumbai. That’s a distance of 1,968 km. On a map, this looks closer to a straight line, at least the Nagpur- Mumbai segment. In bits and pieces, this was eventually completed in 1900, thanks partly to BNR. Howrah-Nagpur- Mumbai is not as short as it seems at first blush. A shorter Howrah-Mumbai route ought to be via Jabalpur. There is no problem with the Mumbai-Jabalpur link. However, the Jabalpur-Howrah link, cutting across Chhattisgarh and Jharkhand, doesn’t exist. If there was such a line, the distance between Howrah and Mumbai would become less. Some say it would be reduced by 400 km, others by 500 km. I guess it depends on the precise layout of the line. The strange bit is that the British first seemed to have thought of the Barwadih-Chirimiri link in 1925. That’s some 90 years ago. Chhattisgarh and Jharkand are mineral- rich and they were that 90 years ago also. The British wanted the link so that coal reserves could be exploited. Barwadih is in Jharkhand and Chirimiri in Chhattisgarh. The distance between the two stations is 182 km. Notice that both the Barwadih and the Chirimiri railway stations are connected by broad gauge lines, but not to each other. There is some stuff that is apocryphal and in the nature of railway legend. Since this history hasn’t been chronicled that well, unlike that of major railway networks, you don’t really know what is true and what is not. According to railway legend, for Barwadih-Chirimiri, the British did a survey, acquired land and even started construction in 1930. Then World War II intervened and that was that. Nothing happened for a long time until the line was officially approved in 1999. This is symptomatic of that geographical bypassing.

I have mentioned Hyde Clarke and the focus on hill stations earlier. This brings in the question of what came to be called branch lines. In 1902, Lord Curzon went on a visit to the area around Lumding and had a conversation with the agent of the newly constructed railway line. “Now, Mr Woods, that you have built this line, what traffic do you expect to carry?” “Nothing, sir.” “Then why build the line at all?” “I do not know” was the reply. “The Government of India ordered it to be built, Sir!” That’s how many branch lines were built. In 1969, there was a Railway Committee on uneconomic branch lines and we had some kind of definition of a ‘branch line’. Branch lines are narrow gauge lines and those broad and metre gauge lines that join the main network only at one end. There was also a double kind of definition of an uneconomic or unremunerative branch line: a) it did not make profits; b) it did not make profits more than the rate of dividend paid to the Union Government. Note that if there is gauge conversion and switch from narrow to broad gauge, the number of branch lines (and uneconomic lines) declines. Nevertheless, there will be some lines that will be unremunerative, whatever be the definition of ‘unremunerative’. As we ask the railway system to be driven by commercial considerations, we still need to answer that basic question. Who pays for unremunerative lines—not just construction costs, but running costs? Who does the cross-subsidisation?

Everyone who has read up on the history of railways in India knows about the guarantee system. Very briefly, one can think of four phases of railway construction in India: 1) The phase up to 1869, with private companies constructing lines (particularly trunk routes) under the old guarantee system; 2) The Government of India entering construction and managing the railways, a phase that lasted throughout the 1870s; 3) Hybrid public- private partnerships from the early 1880s, with the Government of India owning most lines and private companies involved in construction and operations; 4) The Government of India taking over railway operations, starting in 1924. Within that fourth phase, some changes came in when the Railway Board was introduced in 1905. While this helps, one must remember that life was much more complicated. Towards the close of the 19th century, there were 10 different systems in simultaneous existence: 1) Lines constructed, owned and operated by private companies under old contracts and guarantees; 2) Lines constructed, owned and operated by private companies under new contracts and guarantees; 3) Lines constructed, owned and operated by the Government of India; 4) Lines owned by the Government of India, but constructed and operated by private companies; 5) Lines constructed and operated by private companies, without a guarantee, but with some kind of government assistance; 6) Lines owned and operated by Princely States; 7) Lines owned by Princely States but operated by the Government; 8) Lines owned by Princely States but operated by private companies; 9) District Board lines, short local lines within a district, financed through a local cess; and 10) Lines in foreign (French or Portuguese) territory. I suspect a number of people don’t know that (9) also existed.

The Railway Board was set up through the Indian Railway Boards Act of 1905. A resolution of 18th February, 1905, explains what the Railway Board was expected to do: ‘There are two distinct classes of duties with which the new authority will have to deal. The first is deliberative and includes the preparation of the railway programme and the greater questions of railway policy and financial affecting all lines. The ultimate decision on such questions must of necessity rest with the Government of India. The second class of duties is administrative, and includes such matters as construction of new lines by State Agency, the carrying out of new works on open lines, the improvement of railway management with regard both to economy and public convenience, the arrangement for thorough traffic, and the settlement of dispute between railways. It is in respect to these duties that the greatest advantage in the establishment of an authority outside the Government of India is looked for.’ The objectives were multiple and conflicting and would plague the railways in the future. NG Priestley was the first Secretary of the Railway Board and he wrote an ‘essay’, a bit like a status report on the railways in 1905. In that, he said: ‘When the idea of constructing railways in India was first started, it was considered that there would be little passenger traffic on account of the poverty of the people, and that the chief business would be derived from goods… In a country which is almost entirely agricultural, and with distances so great as in India, the principal traffic of railways must necessarily be in goods.’ Precisely, and because of the way the railways evolved in India, the emphasis became passenger traffic, much before misalignment in passenger versus freight tariffs. That’s the reason railways didn’t stimulate GDP and productivity growth by as much as it did in other countries. In other major railway networks in the world today, freight is important, much more than passenger traffic. In India, passenger traffic is important, much more than freight.

The last bit of history is the Acworth Committee. By the end of the 19th century, the Government of India started acquiring some of the older railways and also started railway construction on its own. This affected the Government’s budget and finances. Revenues from railways were considerable and any volatility in these meant that government receipts declined. When these declined, capital expenditure on the railways suffered. The trigger was a management contract with EIRC. When that came up for renewal in 1920, the Government appointed a Committee under the Chairmanship of William Mitchell Acworth and the report was submitted in 1921. I will take up the Acworth Committee in the next column.