Reform of Bangladesh Railway: A long cherished dream

Md. Golam Mostofa
Director (Engineering)
Bangladesh Railway

Bangladesh Railway, a principal transport service provider, is a Government-owned and Government-managed unique organization, serving a large number of population of the country for a long period of time. As railway is a very important mode of inland transport, its healthy growth naturally contributes to the economic development of the country. But BR, at present, has been suffering from various operating bottlenecks. Critical analysis of the efficiency of BR points up the worsening operating ratio over the last decades. Operating ratio is the ratio of operating expenses to operating revenue of an organization. The following figure points that operating expenses of BR is around two times higher than the operating revenue in last ten years. From commercial point of view, for any economically healthy organization operating ratio (%) should be less than 100.

Institutionally, BR has limited managerial and operational autonomy and less commercial and marketing orientation. BR is not in a position to take rapid business decisions to focus on market segments where rail has a comparative advantage over other modes. Decisions such as tariffs to be charged, abandonment of unprofitable passenger lines and all major investment decisions have to be referred to the Government under normal service rules and practices. The delays inherent in such a process have also often meant loss of business opportunities.

The railway currently operates on a deficit financing regime which does not effectively target subsidy to real needs. BR is organized along traditional regional and functional lines i.e. production led which is not driven by market requirements. Hence, some of the inherent disadvantages of the current organizational structure are that net result responsibility exists only at top levels, its objectives are not set business by business, and consequently there is a lack of strategic focus. The result is negative economic performance of BR.

In light of the various challenges and problems facing BR and the railway sector in Bangladesh, the need for reform of BR becomes imperative. Bangladesh Railway as well as the British Colonial Railway has undergone several recovery and reform program since railway’s first establishment in 1862 between Drasana and Jagati in Bengal region, all aiming towards improving the performance of institutional capacity and commercial orientation of railway. Some of the important time lines when major changes were made are listed below:-
w 1862 to 1946 – Railways in Bengal region was managed by different companies including state owned companies e.g. Eastern Bengal Railway, Northern Bengal Railway, Assam-Bengal Railway Company, Noakhali (Bengal) Railway Company, Brahmaputra-Sultanpur Railway Company and Sara-Sirajganj Railway Compant etc.

  •  1947 – Bengal and Assam Railway was split up and the portion within the boundary of erstwhile East Pakistan was named as “Eastern Bengal Railway”, the control remaining with the Central Government of Pakistan.
  •  1961 – Eastern Bengal Railway renamed as Pakistan Eastern Railway.
  •  1962 – A Railway Board was formed and management of Pakistan Eastern Railway was placed under the Provincial Government
  •  1972 – After creation of Bangladesh as an independent nation in 1971, it inherited a Railway Board which was responsible for the functioning of the rail network on behalf of the Government. Pakistan Eastern Railway was renamed as Bangladesh Railway.
  •  1973 – In 1973, Railway Board was abolished and its functions were merged with the Ministry of Communications (MOC) and the executive functioning of the network was placed under a General Manager.
  •  1976 – In 1976, the Railway Board was re-established to conduct the management functions, with MOC exercising policy control.
  •  1982 – The Railway Board was again abolished with effect from June 2, 1982 and a Railway Division was created in the MOC with the Railway Division being vested with the functions being discharged by the erstwhile Railway Board. Secretary, Railway Division in the MOC was made to head BR and to discharge the functions of DG/BR. The Railway was bifurcated into East and West Zones, each placed under a General Manager with supporting administrative structure.
  •  1991 – The Railway Recovery Programme (RRP) was launched in 1991 to improve the general conditions of Bangladesh Railway through (i) reduction in manpower, (ii) introduction of Public Service Obligation (PSO) concept, (iii) withdrawal of concessions in tariff, (iv) introduction of welfare grant and (v) closure of unnecessary functions. As a result, the work force was reduced from 58,000 to 40,000 through voluntary separation and natural attrition. Apart from this, a number of revenue losing branch lines, sheds, depots etc, were closed and some of the non- profitable passenger train services were withdrawn.
  •  1994 – The Organization Reform Program (phase-I) launched in 1994 had the key recommendations: (i) To separate Railway Organization from Ministry of Communications, (ii) Formation of Bangladesh Railway Authority (BRA), (iii) Allocation of Authority and Power among Bangladesh Government, BRA and BR Management and (iv) Restructuring of BR. The Phase-II & Phase-III of Organizational Reform with the same objective followed subsequently.

BRA was created through a Cabinet Resolution dated August 12, 1995 and delineated the authority matrix between GOB, BRA and BR through another Govt. Resolution dated March 9, 1996. BRA was constituted for providing policy guidance to BR in railway matters with the Minister of Communications chairing this multi disciplinary body consisting of 8 members drawn from Govt. (4 members), BR (2 members) and the private sector (2 members). BRA and BR were placed under the administrative control of the Roads and Railways division of MOC. At the same time, DG/BR was appointed from the Railway cadre without ex-officio status as Secretary to GOB. BRA was charged with the responsibility to determine policies relating to railway operation in the context of National Transport Policy, ensure accountability of BR management and determine long term investment plan and strategy of railway. BR, headed by DG, was assigned responsibility for the day-to-day operations of the Railway.

A new Marketing and Corporate Planning Department and a full fledged Personnel Department were also created in the DG’s office to focus on the marketing and human resource development (HRD) functions. DG/BR was made an ex-officio member of BRA along with two ADGs of BR as non-voting members.

The allocation of powers between GOB, BRA and BR passed in 1996 resolution provide BR and its management with sufficient powers to make autonomous decisions and operate on a commercial basis. Unfortunately, the allocation of powers set out in these resolutions has not been effectively carried out. In several key areas, powers that were allocated to the Director General have been taken over by the MOC.
w 2006 – Bangladesh Railway has embarked upon a comprehensive reform program in 2006 to achieve the guidelines of the National Land Transport designed to integrate all aspects covered under earlier program with more focus on Restructuring BR into Lines of Business (LOB) structure, improvement of financial management & accounting system, preparation of asset registry for all LOBs, improvement of HR management structures etc.

Under this reform program, the best practice model in line of the Railway Board was proposed by the reform consultants as shown in the following figure. The reform consultants recommended that an ordinance be drafted containing the following elements:
a) the constitution of a Railway Board as the decision-making body for BR, reporting directly to the Minister of Communications and discharging the functions of the secretariat of the Government pertaining to the Railway.
b) the Chairman to have the rank and powers of a Secretary to the Government and the Members to have the powers of Additional Secretaries to the Government;
c) the necessary powers to run the railway on a day-to-day basis to be delegated through a Schedule to the Ordinance, basically setting out the allocation of powers and responsibilities of both the Railway Board Ordinance 1976 and the 1996 Resolution and Schedule;
d) BRA to be dissolved, its powers reassigned to the Minister of Communications and the Railway Board as appropriate, after review by BR management and the Ministry.
The model for the proposed relationship between BR and the government is found in the 1976 Ordinance (Ordinance No. XLI of 1976) creating the Railway Board. (This Ordinance was repealed by Ordinance No. XXIV of 1983 which dissolved the Board and made BR a department of MoC).

The Railway Board was modeled on the Indian system from which it, along with the Railway Act of 1890 that regulated all aspects of BR operations, was derived. This Board was autonomous and possessed broad powers over management and operation of the railway.

This model provided a very effective organizational format for running the railway in the early years of Bangladesh’s independence. The railway actually made a profit during this time. There are many positive features to this model: it concentrates management in a small group that has strong decision-making powers; it gives management the autonomy it needs to run the railway on a day-to-day basis; it separates the accounts of the railway from the general accounts of government, enabling it to benefit from its own revenues and make independent spending decisions.

The reform consultants submitted their proposal in Working Paper-1 (LOB Structure) & Working Paper-2 (LOB Organogram) in May 2008 which was submitted to MOC on 05 November 2008 and in-principally agreed in the 6th Steering Committee Meeting on 17 December 2008.

The Honorable Minister, MOC approved the recommendations of Working Paper-1 & 2 on 27 October 2009. Thereafter, the summary for the Cabinet was sent to the Cabinet Division on 05 November, 2009. The Cabinet Division requested to send the summary through the Secretarial Committee on Organizational Reform after due concurrence of the Ministry of Establishment (MOE) & Ministry of Finance (MOF). MOC sent the summary to MOE and MOF on 09 December, 2009. MOE and MOF have given their comments on LOB Structure & Organogram. The revised LOB Structure & Organogram was sent to MOC on 14/06/2010 for approval by the Government. Meanwhile, the Honorable Prime Minister has given directives to form a separate Ministry named “Ministry of Railways”. Thereafter, Ministry of Railways was established on 04 December 2011 with a view to focus on the railway activities.

Establishment of the Ministry of Railways (MOR) does not show positive impact on the performance of BR, rather the trend of operating ratio of BR goes upward. BR is facing hindrance in day to day operations due to the top-heavy administrative directives of the Ministry. MOR is over engaged in non-productive functions, taking unachievable targets, making queries and sending letters to and from BR which in turn creates wastage of time. Actually the benefits of reform program taken in 2006 goes to the Ministry and BR remains in its prior position struggling to improve efficiency without much autonomy. If the situation deteriorates, operating ration of BR will still continue to go upward and what will be the upward limit, nobody knows.

In the light of experience gained during the past nearly four decades of reform and restructuring, any future relationship between BR and GOB must provide a structure in which authority and accountability must be coterminous at the functional levels of management. Only then autonomy would be possible because it is underpinned by accountability with authority. The creation of any intermediary organization between the Govt. and BR brings in a mismatch between authority and accountability. The Railway Board is the only GOB-BR relationship that gives autonomy and posses broad powers over management and operation of the railway. However, the mere setting up of systems and procedures will not of itself ensure success. Success will only follow if the right attitudes are developed and promoted throughout the organization, starting at the very top with the Chief Executive and extending down to the lowest operative staff levels. All units of the organization must become and remain customer aware, and their activities must be harmonized and coordinated with the satisfaction of customers as the fundamental objective.

We are grateful to the Honourable Prime minister for establishment of the Ministry of Railways in 2011 and also requesting attention of the Honourable Prime Minister to form a strong Railway Board in line of the Indian Railway Board with full power and autonomy under the Ministry of Railways, which is a long cherished dream of all railway employees and the general public.

References
1. The World Bank. “Bangladesh Government that Works: Reforming the Public Sector” (Dhaka The World Bank, Country Department 1-South Asia Region, 1998).
2. Asian Development Bank, “Railway Sector Investment Program (Bangladesh)”, 19 September 2006.
3. Bangladesh Railway, “Information Book 2016”.
4. A study on costing profile of Bangladesh Railway.
5. National Land Transport Policy, April 2004.
6. PricewaterhouseCoopers Private Limited, “Working paper-1 (LOB Structure) & Working Paper-2 (LOB Organogram)”, 07 May 2008.