India’s first rail regulator will initially be set up through an executive order

The Centre will likely attempt at securing legislative backing to the Rail Development Authority (RDA) next year to give more teeth to the country’s first rail regulator that will initially be set up through an executive order.

The Union Cabinet on Wednesday approved setting up the rail regulator responsible for recommending passenger fares, setting performance standards for rail operations and creating level playing policy for private sector participation through an executive order.

‘Dire need’

“The idea was to make the rail regulator functional through an executive order as the Indian Railways is in dire need of reforming its tariff structure. The authority will be subsequently strengthened later this year through the legislative route,” said a senior Railway Ministry official.

“We will also examine its functioning and structure for the first six-eight months and may move to Parliament next year to give it statutory powers,” the official said, adding that the Railways Act, 1989 will be amended to insert a new chapter related to the RDA.

The Ministry has targeted issuing a gazette notification to set up the Rail Development Authority by April 15. Following selection of the Chairman and three members of the regulator by a committee headed by the Cabinet Secretary, the functioning of RDA is expected to begin by August this year.

After being formed, the Authority will work within the parameters of the Railways Act, 1989, an official statement had said on Wednesday. This means, it can only recommend changes to passenger and goods fares to the Railway Ministry which will taken a final call on fixing tariff.

‘Lack autonomy’

“It would be better if the Authority is set up through the statutory support so that its recommendations become binding on the government. The regulator may lack autonomy if it’s formed through an executive order,” said former Railway Board Chairman Vivek Sahai.

The concept note released by the Railway Ministry early last year had stated that in cases where the government does not accept the regulator’s suggested fares, “the Indian Railways would need to be compensated” through “increased allocations in the gross budgetary support or through a suitable mechanism.”

However, a Railway Ministry official said the proposal was dropped later as no appropriate mechanism for compensation could be developed.

All the six regulators in the country have the sanction of Parliament and have been accorded a statutory status.

These include: Telecom Regulatory Authority of India, Airports Economic Regulatory Authority of India, Insurance Regulatory Development Authority, Central Electricity Regulatory Commission, Tariff Authority of Major Ports and Pension Fund Regulatory and Development Authority.