Indian Railways

Yesterday's New York Times featured an interesting article on railways in India which provided yet another vivid example of why government doesn't work. It seems that demand is outstripping supply for transport on India's railways, driving up costs and resulting in delays getting products to market:

S. K. Sahai’s firm ships containers 2,400 nautical miles from Singapore to a port here in four or five days. But it typically takes more than two weeks to make the next leg of the journey, 870 miles by rail to New Delhi.

For most of that time the containers idle at the Jawaharlal Nehru Port near Mumbai because railway terminals, trains and tracks are severely backlogged all along the route. Counting storage and rail freight fees, Mr. Sahai estimates the cost of moving goods from Mumbai to Delhi at up to $840 per container — or about three times as much as getting the containers to India from Singapore.

Now if this were an evil, greedy, profit-driven private corporation the solution to this problem would seem rather obvious: expand railway capacity in order to accommodate more customers and make more money. But it's not. Instead Indian Railways is a compassionate, non-profit oriented government-run entity, which means that its operations are dictated far more by political considerations than good business sense:

Political analysts say that the current railway minister, Mamata Banerjee, has been distracted by her party’s campaign to win elections in her home state of West Bengal. Those political ambitions, they say, have inspired populist policies by Indian Railways that are at financial odds with modernization and capital investments.

Even though Indian law allows the railways to acquire land quickly through hearings before magistrates, for example, Ms. Banerjee has promised farmers and other landowners that the ministry will negotiate with each landowner whose property must be acquired for two large freight projects. While popular with landowners, the process could add years to the projects.

An assistant to Ms. Banerjee said she was not available for an interview because she was busy with recently concluded municipal elections in West Bengal.

Ms. Banerjee is hardly the first railway minister with a political agenda, though. And most of the ministers who preceded her have funneled the railways’ limited resources into subsidies for passengers at the expense of freight service.

Even though passenger services lost about $4 billion last year, the government has not increased fares for seven years. And it has even lowered some prices, in the face of inflation that has ranged from 3.8 to 13 percent a year.

As a result, migrant workers, for example, can travel from Mumbai to their homes in Bihar, 1,050 miles away, for 500 rupees ($11). Last year, Ms. Banerjee introduced a new monthly ticket good for travel up to 100 kilometers (61 miles) for 25 rupees (54 cents).

Sounds a lot like Amtrak. The article then goes on to explain how this arrangement is paid for:

To subsidize passenger travel, the railways levy some of the highest freight tariffs in the world. India charges four times what American companies charge for rail freight and twice as much as in China.

It's worth noting that businesses who use freight rail can't vote while passengers can. Coincidence? Every time government assumes more control of the economy, another aspect of our lives is tossed into the political cesspool.