Indian Railways : The Principal Agent Conundrum

To call the bluff of the snake oil salesmen of Rail Bhawan who comprise #KMG & #AIDS we published detailed critique of #emotional-intelligence and the famed #autobiography of the #Advisor. The man who will go down as the wily saboteur of #IndianRailways. Just walk to any office of Indian Railways and you will be told umpteen stories of the #damage which he did, sitting on the third floor.

14 Dec, 2022: “KMG: Never A Bystander–A Standard & Deeper Analysis: पार्ट-3”

13 Dec, 2022: “KMG: Never A Bystander–A Standard & Deeper Analysis: पार्ट-2”

12 dec, 2022: “KMG: Never A Bystander–A Standard & Deeper Analysis: पार्ट-1”

We also presented hard facts to prove why Rail Ministry holds unique distinction of nemesis of railway ministers.

15 Oct, 2022: “क्या खराब रिजल्ट की कीमत केवल रेलमंत्री ही चुकाएंगे?”

After snake oil salesmanship or #Sudheer_Sense, we introduced a new paradigm to analyse the reasons why political leadership will pay the price-not the babus of rail bhawan.

31 Jan, 2024: “Moral Hazard and Principal Agent Problem of Indian Railways!”

Mechanism of #KMG

“Khan Market Gang” (#KMG) was identified by our Hon’ble #PrimeMinister as the people who had infected every decision making process of #Government. Our analysis fired by the brazenness of #Advisor led us to the discovery of #KMG of Indian Railways. Note that principal-agent paradigm has two very distinct dimensions:

• Goals of rent seeking babus of rail bhawan not aligned with those of Political leadership
• Asymmetric information-agents having control over information creation and transmission

Political leaders rely on these very #bureaucrats to assess the implementation of their directions. However, the problem arises even before that. The #KMG ensures that the priorities of the Indian Railways (IR) are aligned with their own needs, rather than the other way around. This means that one #Minister may push for a lean #RailBhawan, while another minister may bloat every department and function.

Due to the #Railway’s intricate processes and complex technologies, which come with #Safety considerations that frighten ministers, they have no choice but to rely entirely on these babus. The #Railways heavily rely on closed-off consultants and can only get retired officers as advisors, as the current minister has done. Once the minister gives in, the KMG takes advantage of the situation. This “controlled analysis” becomes the basis for investments, investment models, and returns to the industry. If the minister is honest, it is even better for the KMG.

Taking advantage of #SureshPrabhu’s honesty, the #Advisor manipulating then Chairman of the Railway Board, #AKMital, manipulated the schedule of financial powers in favour of the #Stores department. This is the #root-cause of the numerous cases being investigated by central agencies within the Indian Railways. A record number of #traps and #arrests have occurred, and this imbalance of power among various positions within the railways can be traced back to this fact as the reason.

The Achievement of Agents-Failures of Principals

The group responsible for the majority of the problems faced by IR was given complete control under the guidance of the Minister’s advisor. It is as if #thieves were previously guarding the treasure, but now they have been given the keys to the mint. In the past, the main issue was lack of funding, which resulted in #accidents such as the Kalindi-Purushottam Express. However, under #NaMo, the amount of #money allocated to Indian Railways has exceeded what IR has received since its establishment in the 1950s.

However, the snakes of #KMG have imposed their own agenda onto IR, resulting in a series of #CBI cases and accidents like #Ondagram and #Balasore, despite massive investments. The entire top #leadership of IR, currently in L-15/L-16 positions, has been derailed, while #domain experts have been sidelined. Modern rolling stock, which attracted significant investments, is now effectively controlled by private parties.

The needs of common citizens have been neglected, with a significant decrease in the number of berths/seats for general class, poor punctuality, and a severe decline in safety. Hastily made decisions regarding #BMBS and #coach-toilets are now haunting #IR. The command structure of IR has been severely disrupted by the ill-conceived #IRMS, greatly affecting the morale of senior officers who worked hard to develop expertise in their respective fields. There are now three stores officers as general managers, while individuals with valuable workshop and operating experience have been sidelined and their careers ruined.

To their credit, these #agents have successfully renovated the entire 3rd floor, prevented transfers out of New Delhi, and influenced the appointments at Rail Bhawan by transferring positions back to the Board. Rather than strengthening the general managers (#GMs) and divisional railway managers (#DRMs), the bloated directorates at Rail Bhawan are now relying on frontline units to carry out their work. This has resulted in the abdication of the operating and safety responsibilities of GMs and DRMs, as they are now more focused on managing #Construction through their #GatiShakti branches.

These agents (#babus of #RailBhawan) have successfully deceived the #political-leadership, who are now busy defending the #mistakes made by the #KMG. Mumbai-Delhi Expressway was conceptualized and completed within two terms of the #Modi-government. Despite massive inflows in #tracks, #signalling, making rails available, so called liberalisation of #sleeper policy, elimination of #diesel-locomotives, more powerful #trainsets and #locomotives, elimination of thousands of stops, stoppage of many train services, retirement or scrapping of #ICF coaches, the average speeds of trains has come down. This is what political leadership has to defend. #Traveling conditions in which common man who votes has deteriorated.

Broken Top-Eroded Bottom

Hundreds of Level-15 and Level-16 officers have been overlooked on flimsy grounds, leading to a loss of #motivation among top frontline officers, who are typically Principal Heads. This unprecedented #demotivation at the top level of the organization is hindering their willingness to take on challenging assignments and show initiative. Consequently, recent #Board-Members have failed to inspire young officers.

Adding to the concern is the fact that direct #UPSC recruits will enter the system after a record-breaking five-year gap. Normally, it takes 6-8 years for a direct officer to become a branch officer. This raises the question of where the IR will now find their branch officers (#BOs), and unfortunately, there is a lack of discussion on this issue.

Amidst DRMs prioritizing construction projects and a diminishing pool of new branch officers, the IR is facing a worrisome situation. It appears that the IRMS system has been designed to address these challenges by potentially promoting more officers to #Group-B. This departure from the traditional practice of appointing direct officers from UPSC could impact the status of railway services in comparison to other central services.

Overall, the situation at the #IndianRailways is concerning, with demotivation at the top level and a shortage of Assistant and Senior Scale Officers at bottom. These issues need to be urgently addressed to ensure the smooth functioning of the organisation.

Moral Hazard

The babus successfully hid the real challenges of IR and instead pushed their personal pet projects. The failure to rotate positions has led to a strong sense of entitlement. What is surprising is that this government has openly worked against this aspect of entitled bureaucracy, thus lending protection to entitled railway bureaucracy is a significant failure of political leadership.

The #Railway-services have undergone significant changes due to major #Policy decisions and mega #tenders, which have been made by officers who had only a few months left in their service. These officers will not be affected by the consequences of these decisions, which will be borne by future generations of officers. This #decision-making process is morally incorrect and unethical. As railway safety, punctuality, and service quality deteriorate, these top bosses will be held accountable.

The officers who thought they were working unnoticed can no longer rely on this protection. The #KMG is now fully exposed, with detailed input about most of the Executive Directors (#EDs) of the railway board and key #RBSS officers. The bureaucrats successfully concealed the true challenges faced by the IR and instead prioritised their personal projects.

We touched few of these aspects in our article dtd. 15 Jan, 2024: “Itch to Transform – Time to Summon Courage to Take Decisions that are Needed”. Now we try to list these below. If not addressed, no #reform will succeed.

Barking Up the Wrong Tree

#Departmentalism has been often been talked as the bane of Indian Railways. This led to the base idea and subsequent implementation of IRMS which has now created a serious disruption at the #PHOD level and dried the stream of young direct recruits in Junior Scale. After last #recruitment in 2019, recruitment of #engineers through much vaunted and respected engineering services examination (#ESE) by UPSC has stalled. Despite massive investment in tracks, bridges, rolling stock-the hands which will maintain and operate them to needed safety standards will not be available.

How would this disruption be handled?

The idea of #Advisor led #KMG was that #supervisors will be put on fast track to handle #technical matters betray #KMG’s lack of competence.  

Sadly, #KMG led political leadership to the wrong problem.

Reducing number of Zones

The increase from nine to sixteen #ZonalRailways was seen as a significant reform and a move towards #decentralisation. However, even at that time, there were concerns about the validity of this argument in light of #computerisation. Network management is a centralised activity, so the question remains: why were more #Zones necessary? In times when government is stressing breaking of silos-Zonal Railways are big organisational silos.

Itch to Reform-The Do Something that is Really Bold

You want to make #bold-decisions, revert back to a single-digit number of Zones and restore the pyramid structure of railways. This may result in a reduction of number of general managers, but that should not deter us. In today’s context, #GeneralManagers are essentially performing the role of DRM/Coordination. Let’s give Level-17 to these fewer general managers.

RBSS reform

Why should #RBSS not be merged with Central Secretariat Services (#CSS)-which runs all ministries? What is so special with Rail Bhawan? So next in bold reform should be to merge RBSS with CSS.

Unions

Do you remember when the last #elections of the #Unions were held? It was almost a decade ago. Hold elections at the earliest. Implement the following two rules: #Firstly, once a person retires, they should no longer be affiliated with unions or hold any office within them. #Secondly, union office bearers should be rotated just like other staff members. To continue..