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EMERGING PROFESSIONAL AND ETHICAL CHALLENGES FOR RAILWAY ENGINEERS

- Anil Kumar Gupta, IRSE, 87 Batch, General Manager/RI, RLDA

1. Introduction

1.1 Changes in the World: 25 years, a quarter century, is a long time for the world to change. In 1989-91, when the author entered the prestigious Indian Railway Service for Engineers as AEN/2 at Mughalsarai, computer had just made entry to railway offices, there was no mobile phone, pilot projects had just been introduced on select sub-divisions of Indian Railways for Track Management System and Fully Mechanized Track Maintenance System. World, India’s economy, infrastructure sector especially transport sector have all made rapid advances since then. New age technological advances, internet, privatization of erstwhile government activities have all changed the landscape drastically. But has Indian Railways kept pace with these advances? The answer is both yes and no. There has been tremendous progress in introduction of technology in every wing of Indian Railways, including civil engineering department, but network expansion, line capacity augmentation, passenger and staff amenities have not seen similar advances. The reasons are- over the years Government’s budgetary support has been reducing, internal resource generation hasn’t kept pace with the country’s growth, private investment has given a miss to Railways and we haven’t augmented our project implementation capacity to meet the fast development challenges. In the meantime other infrastructure sectors in India such as power, telecom, port, civil aviation, highways and metro transport have all made rapid advances in all these spheres.

1.2 Changing Role of Engineers: Gone are the days when engineers were considered only a spending department and its contacts were one sided like those for master and servant. With the increasing private financing of Five Year Plans (from 22% in X Plan to 48% in XII plan), there has been drastic changes in the role of engineers in infrastructure ministries. Engineers are now project managers and have to structure their projects to attract private investment, market their project, generate revenue from allied activities like commercial development of surplus land for re-investment in projects, and manage the contactors for much longer period (upto 30-45 years) and consider them as important stakeholders. Thus the roles of engineers and nature of contracts have become that much more complex. But Railways haven’t kept pace with these developments. There is no lack of initiatives or efforts. But somehow we are far behind other ministries and there is an urgent need to sit back and ponder as to what went wrong with these initiatives and experiments in Railways. What are the challenges and opportunities before Railway engineers, especially before civil engineering department and how these can be managed? How new age developments have posed before us questions of professional ethics and integrity in a lot different manner than what had been visualized and dealt with in the Indian Railways Services (Conduct) Rules, 1966 and its subsequent amendments? Do we need a new code of professional ethics and integrity for officers and supervisors for successfully tackling these challenges? The author has first discussed the opportunities and challenges before the engineering departments and later talks about the professional ethics and integrity.

2. New opportunities

2.1 Land: Land is the most important yet a scarce resource for any infrastructure development. Its increasing value has been reflected in manifold rise in the quantum of compensation to land owners under ‘The Right to Fair Compensations and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, which received presidential assent on September 27, 2013. With the exponential rise in land prices in urban areas now land is being leveraged in many ways for funding infrastructure and real estate projects. Whether it is

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Highways (Bangalore-Mysore Expressway and Greater Noida – Agra Taj Expressway), Airports (Delhi and Mumbai) or Metro Railway (Delhi Metro and Hyderabad Metro) commercial development of land constitutes a major chunk of the project revenues apart from user fees. On Indian Railways projects like development of railway stations and Multi Functional Complexes (MFCs) are being fully funded through commercial development of land. Despite this we haven’t yet considered land as an asset and our existing land management administrative units in Zonal Railways are not geared up to exploit fully this opportunity. Due to this even after creation of Rail Land Development Authority (RLDA) earning from land has not significantly increased as high value railway land parcels are not available for exploitation.

At present CEG of Zonal Railway monitors administrative works related to land management including licensing of land. But the unit under him is structured to work like an administrative wing and not like a project unit involved in generating additional revenue. Based on author’s 5 year experience in RLDA following changes are suggested in the set up of CEG:

(a) Vacant surplus railway land that exist at present on railway have hardly any commercial potential except few which have already been assigned to RLDA. But surplus land bank suitable for commercial exploitation can be created gradually through rehabilitation & re-organization of existing structures on railway land as they are at present not optimally planned. Each zone should have a yearly target in terms of value of land surpluses to be generated. Following activities should be part of the surplus generation as without them land cannot be leased to private parties:

Retrieval of land title papers;

Partitioning and getting new survey no.;

Permission from local authority or land use charges if required. (b) All new plans for quarters, service buildings, colonies etc be developed with a view to optimum utilization of land and for this there should be a land utilization audit by the CEG’s unit before such plans are finalized. (c) Identification of encroached or illegally occupied railway land that has high commercial development potential and their planned removal either through orders of court or rehabilitation by utilizing the provisions of Urban Slum Rehabilitation Act of State Governments. (d) Field units of RLDA should be created that will work closely with CEG’s unit and assist it in above activities. Smaller sites having potential upto Rs. 10 crore should be commercially exploited by the field units of RLDA in close association with CEG’s unit. (e) A separate revenue expenditure head, say 2% of the value of surplus land parcels to be generated annually, for preparatory developmental works for readying land for commercial exploitation should be created and CEG should be made in-charge for utilizing it for its activities. (f) CEG’s unit must be strengthened to take up the increased work load and new challenges.

2.2 Alternate Funding of Infrastructure: So far entire funding of railway infrastructure was through Railway budgetary allocations. As more and more plan expenditure is to be funded through private sector, we have to device innovative ways of funding railway infrastructure. Already mechanisms have been placed by the budget finance directorate of Railway Board for capturing the capital investments in Railways through extra-budgetary resources. Alternative

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funding of Rolling stock procurement through IRFC bonds, various Own Your Wagon schemes etc. have been in existence on Railways since a long time. We are also familiar with railway’s policies on private siding and deposit works. Many people argue that funds can be generated through internal surplus and from market borrowings through IRFC. But both these modes of funding have reached its tipping points. Internal generation has its own limitations due to following:

Limited growth on existing network due to capacity constraints;

Steady increase in operating expenditure due to high inflation;

Increasing liability for asset replacement, already huge back log has piled up;

Increasing liability of dividend to service increased budgetary support, at one point of time the budgetary support was lesser than the dividend payment;

Cyclical nature of Operating Ratio, due to pay commissions; and

Limitations of increasing passenger fares due to public pressure and freight for fear of losing market share.

Market borrowing has its own limitations due to following:

Target for IRFC for 2013-14 has reached Rs.15,103 crore;

IRFC’s Debt:Equity ratio is hovering around 10:1, the maximum permitted;

Lease rent liability of Railways has reached Rs. 4,642 crore which was 4% of total expenditure in 2011-12; and

Danger of investing in un-viable railway projects and falling in debt trap.

Hence we have to think of innovative ways for funding of massive modernization efforts in railway stations, staff colonies, capacity augmentation works etc. RVNL was created for funding infrastructure through alternative routes but it has deviated from its original objective and is now mostly executing railway projects with funding from railway budget. Initiatives taken by RLDA are yet to show big results but it is moving slowly in a determined and positive direction with all necessary legal, financial, real estate, contractual and administrative standards and documents having been developed. Efforts of RLDA is now getting multiplied with the signing of MoUs with IRCON, RVNL, RITES and MRVC for developing MFCs, stations, offices and commercial exploitation of land/air space. But this institutional learning now needs to be transferred to the construction organizations of Zonal railways as well as to the CEG’s units in open lines. Member Engineering and Chairman/RLDA has suggested establishing field units of RLDA and implementation of the same is under process. These field units will hasten the process of knowledge transmission from RLDA to Zonal railways. Expectedly all the alternative funding options discussed above has one common element, exploitation of land. But the process can be extrapolated effectively to other infrastructure projects through various PPP modes discussed in following paras.

2.3 Emerging Contract Forms: At present item rate contract is mostly being used in Railway for construction works. This is the simplest and oldest form of government contracting in which the tender is based on either percentage above/below quoted by bidders over a specified schedule of rates or on a few specified items of work for which bidders are asked to quote their rates. This contract form requires highest level of supervision not only for safety and quality of works but also for quantity of works executed. Hence, this is not suitable for bigger and more complex projects. Based on the degree of risk allocation to the contractor, contract structures could be classified as shown at figure-1.

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Figure-1

Item Rate

Contract

Build to

Design

Contract

Design and

Build

Contract

(EPC)

Design, Build

and Finance

Contract

(BOLT)

Design, Build,

Finance and

Maintain

Contract (BOT)

The choice of a contracting model from above framework can be made (or designed by combining two or more) in order to achieve various project objectives such as faster construction with lower life cycle cost, smaller number of interfaces with less intensive supervision and superior asset reliability with lower maintenance duration and cost. Effort in supervision, planning, monitoring, coordinating and interfacing reduces as the risk allocation to the contractor increases from left to right. Bigger and complex projects require contracting structure with comparatively higher degree of risk allocation to the contractor, but this will also entail higher cost. Hence a judicious selection has to be made by railways for a particular project. But this can be possible only if Railway has the expertise and know-how of structuring higher contract forms and implementing them. Railway PSUs like RVNL and IRCON have occasionally used Build to Design contract and Design and Build contract. But as a well considered policy framework Delhi Metro Rail Corporation has utilized all the above contracting structures at various times in various phases of Delhi Metro Project1. Construction organization on Railway can also develop the institutional capacity for undertaking bigger and complex projects and there would not be any need for transferring works to RVNL and IRCON on turnkey basis.

2.4 Augmenting Project Management Capacity: An important element of capacity building in the construction organization of Railway for taking up bigger and complex projects directly is deployment of Project Management Consultancy (PMC). Recognizing the need for this Railway Board constituted a 5 member committee in 20082 to give recommendations regarding implementation of PMC on Railways. Based on the committee’s recommendations, Board (ME & FC) decided to introduce PMC services on pilot basis in 2-3 work contracts in each Zonal Railway relating to throughput enhancement construction projects costing more than Rs. 100 crore each and orders were issued vide letter no. 2007/CE-1/CT/18 dt. 05-07-2010. Detailed guidelines for implementing the PMC, Model RFP document in two volumes – ‘Non-variable’ and ‘Variable’ and Guidance Notes consisting of a typical organogram of a PMC for a 200 km doubling project, step-by-step procedure for evaluation of tenders and note on insurance cover of contractor were also attached with the Railway Board’s letter to the Zonal railways.

Salient features of the PMC Guidelines issued by the Railway Board are as follows:-

PMC shall be ‘contract based’ and not ‘project based’.

High value projects should be executed on a composite contract basis covering works relating to all technical departments and one PMC should be engaged for that contract.

PMC contract be finalized on Quality and Cost Based Selection (QCBS) for works contracts of value upto Rs. 100 crore and Combined Quality cum Cost Based Selection (CQCCBS)3 for works contract of value more than Rs. 100 crore.

PMC shall function in the capacity of and as Engineer’s Representative and Engineer’s Role shall continue to be with regular Engineer of Railway.

Increasing Degree of Risk allocation to Contractor

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Measurement and preparation of bill would be done by the main contractor and to be submitted in serially numbered measurement sheets.

PMC’s supervisor will carry out 100% check on measurement while PMC’s Resident Engineer will do 20% test check.

Nominated engineer of Railway shall carry out test check of not less than 10% measurements, while Dy.CE in-charge of Project shall be overall responsible for proper implementation of system of measurement and billing.

PMC shall idemnify Railway for excess billing claimed and shall maintain a professional insurance for this.

Select PMC personnel to be trained at IRICEN Pune at PMC’s costs on railway related works.

Amendments to Engineering Code and Finance Code to be undertaken after PMC Policy is introduced and sufficient experience is gained.

Main contractor to maintain All Risks Insurance and Performance Guarantee Insurance. If implemented by Zonal railways in true spirit PMC alongwith related reforms in billing and

measurements as explained above will be a big milestone in improving the standards work and institutional capacity of Zonal railways.

2.5 Other changes required in existing Contracting System: Member Engineering constituted an eight member committee4 in November 2009 to study the best practices in other infrastructure implementing organizations and to suggest improvements required on Indian Railways. The committee after examining the feedbacks received from Zonal Railways together with the study of the best practices on other organizations, submitted its recommendations in February, 2010 to Railway Board (ME). Salient points of the recommendations, other than PMC and billing by contractor that have been approved by Railway Board as described at para 2.4 above, are brought out as follows:

Estimates and Plans are the beginning of a project and due diligence for successful project implementation has to start from this point. Committee suggested separate fund under revenue to be provided at the discretion of the PCEs for proper project formulation and preparation of drawings and estimates.

Proper delegation of power is necessary for proper contract and project management. Committee suggested higher powers to CAO/Cs including that of single tender, part termination of contract and offloading to another contractor on single tender. A model Schedule of Power (SOP) in tender and works matters upto the junior most officer specifying a minimum delegation should also be issued by Railway Board to avoid wide divergence in delegation of powers across various Zonal railways

Mechanism of issue of Letter of Intent before issue of LOA has been suggested to bring in accountability, bidder complaint redressal, and voluntary vigilance scrutiny to avoid subsequent questioning on the collective judgment of the Tender Committee.

Liquidated Damage (LD) imposition after the expiry of the date of completion doesn’t serve the purpose of timely project completion. Committee suggested that in addition to a completion date there should also be additional intermediate key dates/ milestones and LD should be linked to non-achievement of these milestones. However, LD should be refundable if a subsequent milestone is achieved or the final completion date is adhered. Further the bonus provision allowed at present to select category should be extended to all major contracts.

Officers posted in construction organization should have preferably a minimum fixed tenure of 4 years. As a matter of career planning, all IRSE officers must spend 5 years in construction each in JA Grade and SA Grade preferably immediately after promotion.

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2.6 Higher Responsibility and Stronger Organization of Contractor: It is very unfortunate for our country that there is no statutory requirement for qualified civil engineers for the design and construction of civil engineering structures. Only architects registered under the central Act are competent to prepare architectural plans including floor plans, internal finishes and external appearances but works involving safety of the building like structural design and construction supervision can be carried out by any person in India as there is no statue for the later. This puts a larger onus on government authorities for specifying mandatory requirements for deployment of qualified civil engineers and structural engineering experts for the design and construction contractors. However, there was no such specified requirement in Railway contracts till recently and this is the reason contractors have not been made responsible for measurement, billing, quality, safety and environment and entire responsibility lies with Railway’s individual supervisor/ engineer. A comparative study of responsibility borne by the authority, contractor and the PMC at three organizations- a CAO’s unit in Railway, RVNL and DMRC (Phase-I) carried out by Gupta and Ramesh (2010)5 are given at Figure-2.

The size of the circles in above figure provides relative and subjective quantum of responsibilities borne by each of the three stakeholders in a project. As may be seen, the biggest circle is for the authority in a CAO’s unit. On account of non-existent defect reporting, corrective and remedial measures (discussed in detail at para 4.4 below) and a hierarchical organization, site engineers in Railway bear the greatest risk for misjudgment or mistake. A comparative picture of risk distribution among individual, the system and the leader (organizational head) in the above three organizations is reproduced from the above referred publication in Figure-3.

Quality and efficiency of an individual’s output is generally inversely proportional to the fear he has for inadvertent mistakes while working. A comparison between Figure-2 & 3 shows a direct correlation of reduction in this risk with increased delegation of responsibility to the contractor and deployment of a PMC. Through a recent circular6 Railway Board has specified

Figure-3: Risk of Misjudgment

DMRC

Individual Individual

Leader Leader

System

RVNL

Leader

System

Individual

System

CAO

PMC

Authority Authority

PMC

Design

Consultants

Contractor

CAO

Contractor

RVNL

Authority

Contractor

DMRC

Figure-2: Responsibility Triangle

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minimum requirements of one Diploma/ Degree Engineer for projects above Rs.25 lakh. Larger responsibilities on the contractor necessitate adequate availability of qualified degree and diploma engineers for supervision, quality, safety and environment control with the contractor’s project team. This issue will be of greater importance for higher level of contract structures indicated at figure-1 above. Without three layers of supervision- at contractor’s level, PMC’s level and Railway’s own supervision bigger and complex projects cannot be properly executed. Railway must quickly move to such a mechanism that is a norm now in other organizations like DMRC, NHAI etc.

2.7 Separate Contracting Norms for Bigger Projects: At present any policy guidelines issued by Railway Board applies generally to all contractual works except that some norms are different for different sizes of contracts. Generally the formulation is based on safeguarding Railway’s interests in the light of past experiences, complaints, vigilance cases etc. There hasn’t been any effort at segregating the dealing of smaller contracts/projects from bigger contracts/projects. Due to this we have not moved forward to better contracting structures explained at figure-1 above. Now there is an urgent need to segregate the bigger infrastructure projects such as new line, gauge conversion, doubling/multiple line, bigger workshop/production unit, major station development projects and move towards progressive legislation for them with regard to types of contracting structure, PMC, measurement & billing and other points discussed at para 2.3 to 2.6 above. Already a beginning was made in this direction by the directives of Railway Board in respect of PMC as described at para 2.4 above. This will provide us an opportunity to focus on rules for faster execution of projects rather than focusing on safeguarding railway’s interests and avoiding irregularities associated with smaller contracts.

3. Public Private Partnership (PPP)

3.1 General: Infrastructure plays a very important role in the growth of our country and higher GDP growth in the last decade is the result of a gradually higher investment in infrastructure. Expenditure on infrastructure in Five Year Plans as percentage of GDP has increased over the years from 5% in X Plan, 8.4% in XI Plan while the target for XII Plan is 10% of GDP for attaining a 9% GDP growth. This enormous investment is not possible through government funding only and that is the reason private funding has been on rise in successive Five Year Plan periods and stands at 48% for XII plan. In last few decades, government has fully unbundled and privatized certain infrastructure sectors through licensing e.g. Port sector and Telecom sector in which private sector is free to invest on their own after obtaining licenses. But in other sectors, of which Railway is the most complex one, private investment is possible only through well structured Public Private Partnership7 projects.

3.2 Governance in Railways: Recognizing the need to place greater emphasis on infrastructure funding through alternative modes, Railway Board created Infrastructure Directorate in the beginning of this century and further created multi disciplinary PPP Cell in year 2006. Author was the first Director in the cell joining in the month of June the same year. But despite passage of 7 years we haven’t been successful in either attracting private investment or implementing PPP projects on Railways. There are several reasons and much can be written on the subject but one of the most important reasons is the fact that Infrastructure Directorate is not under engineering department and engineers haven’t been involved in the process in a big way. If one looks at the contracting framework presented at figure-1 above, item rate contract is the simplest one and the Design-Build-Finance and Maintain Contract that is same as Build Operate Transfer (BOT) contract of PPP, is the most complex contract and duration might extend upto 30-45 years. It is so apparent that if engineers are competent and responsible for design and implementation of the simplest contract then how the most complex contract can be conceived and implemented without the overwhelming role of engineers. Traffic officers in Railways are not trained for this and do not possess the required expertise and

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experience to deal with such complex contracts. In all other ministries, engineers are spearheading, designing, and implementing PPP projects.

3.3 Training Engineers in Emerging Contract Forms: Traditionally departmental structure in Railways has created exclusive functional segregation in which engineers have been assigned the role of technical manager as well as role of a spending department. Traditional short term contracts are carried out as per the time tested GCC, SCC, Engineering Code, and other such manuals, guidelines and tender conditions in which engineers role is limited to preparing technical details and cost estimates of the project and associate finance does the financial vetting. However the emerging fields discussed at para 2 and 3 above require more diverse role from engineers until contract documentations are standardized. Hence selected team of engineers from each Zonal Railway need to be trained to also have understanding of financial aspects of such projects including valuations, financial modeling, financial derivations for IRR, NPV, cost of capital, debt servicing, etc. Finance officers on Railways can’t discharge this role at the primary level as they are trained in Railways to review and vet (reactionary approach) rather than create and structure something new. The engineer handling a project has to have full understanding of the whole of the project only then he will be able to define the scope of work expected from various consultants as well as get that work done properly and he has to adopt a whole to part approach.

There are time tested training modules at IRICEN in contract matters. But no such institutional capacity exists for handling PPP contracts. In year 2010 a modest beginning was made at IRICEN when a few short term seminars/workshops were organized annually but that also appears to have stopped in 2013. At present Railway Board has nominated IRITM, Lucknow as the nodal institute for imparting PPP trainings. But the structure of such trainings is more in the nature of general awareness rather than textbook nature education and training required in contract matters. Further IRICEN, being the nodal institute for training in contracts, should be the nodal institute for PPP contract training too. IRICEN should prepare full-fledged training modules covering intricate contracting provisions of these contract forms supplemented by suitable case studies. Railway has in the past adopted latest technologies in track machine application, modern track structures, track management system, fully mechanized track maintenance system etc. through time tested methods of pilot project and training. The same strategy needs to be adopted for preparing railway engineers for new age project developments.

3.4 Contract Documentation: Railway has to develop its own contract and tender documents. Copying the contracting framework developed by Planning Commission for Highway Sector will not work. Model RFQ and RFP of the Planning Commission is based on single financial bid parameter (Grant or Premium) and further Model Concession Agreement is based on full delegation of responsibility and control for design, construction, maintenance and operation to the Concessionaire. As further explained in para 3.5 below Highway model will not apply to Railways except a few stand alone projects. We have to go for much complex process involving careful sharing of risks between Railway and Concessionaire/Developer, interfacing with Railway’s operations, more financial parameters for cost/ revenue risk sharing and above all a Request for Technical Proposal (RTP) stage in the bid process. It was only due to the insistence of the Ministry of Railways in the working group (meetings of which was attended by the author as Director PPP) that a provision was left in the model RFQ prepared by the Planning Commission through a foot note that allows RTP stage in tender finalization but it stops short of specifying any further details. RLDA has already developed Land Development Hand Book, which covers most of the essential elements of PPP contract and the same can be developed for all PPP contract forms. A standing committee of engineering officers with an ED from Railway Board as chairman and a Senior Professor of IRICEN as convener should be created for development of GCC and SCC for all the higher contract forms listed at Figure-1.

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3.5 Railway Specific Models: PPP models for other than railway sector in India is the simplest one as any one model can be opted from the framework shown at Figure-4.

Figure-4

Service Contract

Lease BOT BOOT BOO License

But Railway is structurally different and much more complex. Any railway project is generally supplementary to or an extension to the existing railway network, and it cannot be operated, maintained and marketed independently like a highway project. This is more so when the existing railway network is fully under government control with no private operator, unlike any highway where thousands of vehicles and transport operators operate. Unlike airports, highways and ports, traffic on permanent trackway cannot operate freely without a high degree of co-ordination among track, OHE, power, signaling, traffic control etc. Safe running of trains is not dependent on trains and train drivers alone, but also on track, signaling and traffic control staff. Further any brown field development on Railways (like station development) can be very complex requiring large interface with Railway operation and cannot be described in standard drawings. Only a few stand alone Railway projects can be designed as a BOT project and these are High Speed Corridors, Elevated Suburban Corridor etc. For other projects we have to devise new models by a combination of one or more contract forms from Figure-1 or PPP forms from Figure-4, for dealing with various components of a project. Some such combinations are as follows:

World Class Station (WCS) Project - EPC + Lease + BOT;

Redevelopment of Station Project – EPC+ Lease + Service Contract;

Commercial Development of Land- (Lease), (Lease + BOT) and (EPC + Lease + BOT), depending on associated redevelopment works;

Development of MFC – Lease + BOT; and

Rolling Stock Manufacturing- Purchase (Item Rate) + BOT.

As an example, Redevelopment of Station Project is being explained here. The project is being implemented by Indian Railway Stations Development Corporation (IRSDC)8. Mandatory development works consisting of station building, platforms, circulating area, offices, staff quarters and other railway operational buildings will be executed through an EPC contract, commercial development of vacant land plots to be done through Lease of land and maintenance of station buildings and passenger areas will be carried out through a separate Service Contract. These three contracts can be combined and given to one developer or can be awarded to separate contractors/ developers. Hence any PPP contract for a railway project has to be designed in house within Railways considering above aspects.

3.6 PPP in Railways Not New: PPP has been happening on Indian Railways since 1986 when railway partnered with Government of Maharashtra in the Navi Mumbai Rail Connectivity Project. Subsequently Railway infrastructures were created through creation of several public companies either fully owned by Ministry of Railways or in joint venture with State Governments and in some cases even with Private Sector. KRCL, CONCOR, MRVC, IRCTC, PRCL, RVNL are some among the long list of such companies. In all such cases projects were funded fully or partly through non-budgetary means thereby forming an important form of PPP on Indian Railways and thus can be considered to be Organization level PPP. In 1994-95 several Build-

Increasing Degree of Risk Transfer

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Own-Lease-Transfer (BOLT) schemes were launched by Ministry of Railways of which one, Virangam-Mehsana railway line project, was successful. Apart from Project Level and Organization Level models of looking at PPP in Railways, there is also Sector Models of PPP. Detailed account of these including comparison with Railway reforms internationally has been given by Gupta and Roy, (2008)9.

Table-1

European Railways Indian Railways

Under utilisation of existing infrastructure capacity

Low GDP growth

Low investment in Rolling Stock and Passenger Services

Rising debt, need for restructuring

Increasing government subsidy

Dropping market share due to inferior service standards

European Union competition requirements

Modernisation for competing with road and air transport

Over utilisation of High Density Network

High GDP growth

Low investment in Infrastructure and Freight Services

Need for more market debt

Dividend paying, no subsidy

Dropping market share due to lack of capacity addition

Evolutionary need, no outside compulsion

Modernisation for adding capacity and meeting with public aspirations

Except the largest ever, the Euro Tunnel Project, there aren’t many examples internationally of Project Level PPP in railways. However, governments in European countries and in Australia have carried out Top Down reforms in Railway sector, unbundling segments of businesses (passenger, freight, rolling stock, stations and fixed infrastructure) and bringing in private operators. But this cannot be applied to Indian Railways as there is a big difference between key drivers leading PPP in European Railways and Indian Railways as shown at Table-1. In India, Sector Level PPP in Railways is happening in a Bottom Up manner on new initiatives and projects rather than disturbing the existing set-up. Segmental separation of businesses has taken place due to separation of container operation, tourism, and to some extent parcel. With expected positive results from IRSDC, locomotive factories and DFCCIL in future we will find Private Station Operators, JV Rolling Stock companies, Private Infrastructure operators playing important roles in Railway sector in India leading more and more Sector level PPPs.

4. Professional Ethics and Integrity

4.1 Importance: In the changing world with fast changing technology and increasing role of private investment in railway infrastructure there is a dire need for change in Railways too. If Railway has to meet these emerging professional challenges, a massive change management program in contract and project management fields has to be undertaken. But there is always resistance to change in any organization. Indian Railways being a large organization the resistance to change will also be expectedly greater. In this regard the need for highest standards of professional ethics and integrity of officers and supervisors cannot be overemphasized. This part brings out some key issues of professional ethics experienced in the service and tries to discuss how the same can be addressed.

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4.2 Defining Professional Ethics and Integrity: ‘The Railway Services (Conduct) Rules, 1966’, as modified from time to time, provides the ‘Dos’ and ‘Donts’ to be followed by every Railway servant. Yet when a word search is made in the latest amended copy of the Conduct Rules, words ‘professional’ and ‘ethics’ do not find any place there. At the same time the word ‘integrity’ finds mention at five places- 2 of which (sub-rule (1) (i) and (2) (i) of Rule 3) are for personal integrity while the rest of three references are in the context of ‘sovereignty and integrity of India’. Every Railway servant is expected to ‘maintain absolute integrity’ (Rule 3 (1) (i)) and ‘take all possible steps to ensure the integrity and devotion to duty’ of junior railway servants under him. But what does the word ‘integrity’ means? The answer is not provided in the Rules, yet every railway officer fills up APARs of juniors commenting about integrity of railway servants. Though not mentioned specifically, from the instructions provided for filling of APAR in case of doubt or suspicion regarding officer’s integrity, one implies that it relates to honesty in official transactions without asking for or accepting any monetary or otherwise favour from the affected persons. But does this capture the professional integrity of a railway servant towards achieving the organizational goals and objectives (not the targets set for the officer) and towards pursuing government policies? The answer is ‘no’.

Clause (ii) of sub-rule (2) of Rule 3 says ‘no railway servant shall…..act otherwise than in his best judgment except when he is acting under the direction of his official superiors’. But consider a situation where a railway officer at a decent level in the hierarchy, is ideologically against any particular policy or initiative undertaken by the Railway Administration or the organization he is working for and he always acts to the best of his judgment but all his actions thus proves to be detrimental to the Railways or his organization, as the case may be. Thus despite the railway officer acting in accordance with the Conduct Rules, he cannot be considered to be following professional ethics of services and his integrity can be questionable. At the same time concerted resistance of such officer might result in protecting Railways against the repercussions of an otherwise inherently flawed policy or initiative and in that respect his actions can be considered to be of the highest order of professional ethics and integrity.

4.3 Targets in Conflict of Ethics: ‘The way a leader monitors, changes the behaviour of members of his organizational unit’. This is an established principle of management. Hence it is very important how the targets are set and how they are monitored. Given the technology, finances, and other available resources, targets must be achievable. Otherwise officers and supervisors would either resort to wrong reporting under pressure to achieve them or simply will not make any serious efforts for achieving them. Both the situations are damaging for the organization but the former is more dangerous. Target for reducing rail fractures in a division is one such example where in order to show reduced incidences of rail fractures, majority of rail fractures might not be reported at all. This may result into a more dangerous situation down the line in the organization as speed restriction will not be imposed, emergency restoration will be carried out without caution order to hide the incidence and the senior officer will lose trail of such discontinuities in LWR tracks. The situation might get further compounded if all available rail welding batches in the section is deployed in achieving the target of LWR conversion at track renewal sites leading to numerous discontinuities in existing LWRs without any urgency for removing them. This is not an imaginary scenario but a real life example witnessed by the author on a new posting in a division when he had to struggle and annoy his seniors to undo the damages at the cost of spoiling the division’s targets. The enormity could be judged from the fact that when correct reporting started the annual target of rail fractures got exceeded in a day in the winter season. Author had to stop progress of LWR conversion under his jurisdiction for several months to clear the backlog of removal of discontinuities. In professional life one will come across such situations often when he has to choose between showing achievement of targets by compromising safety and security or taking care of safety and security at the cost of losing on targets for some time. In the longer run only the later course of action can help

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sustained progress in Railways and the same must get captured in the code of Professional Ethics.

4.4 Open and Transparent Reporting: It is impossible to carry out a perfect construction work without any defect at the site. Our present system in railways; where entire responsibility of supervision, quality and safety lies with railway engineers; encourages hiding of defects to avoid complications in rectification, cost implication in such rectification, vigilance case and further contractual problems. But if Contractor has to assume greater responsibilities as has been argued in this paper, this system must change. Modern quality control and management programs corroborated by ISO codal provisions require that there must be complete openness and transparency in reporting incidences and failures only then meaningful and suitable corrective and preventive measures can be undertaken. If symptoms of disease are hidden from the management no long term improvement is possible in the system. It is possible to cast this in rules and regulations in an organization and the same was successfully implemented by the author while working as resident engineer for MC1A contract (Vishwavidalaya – Kashmere Gate u/g corridor construction) during year 2000-03 on Delhi Metro Project and details are available in a paper by Gupta and Ramesh (2010). By way of creating a work culture and ISO:9001 construction management system, non-reporting of any incidence related to quality, environment and safety by the supervisory level was viewed more seriously than the incidence itself. Incidences can be rectified, corrected, and prevented in future by improvement in the system and that can take place only when supervisors correctly reports and files them. If the same concept is to be applied in Railways to rail failures, concreting defects, hazardous work sites and practices etc. it will be apparent that we have to undertake major changes in our paradigm and create matching rules, procedures and guidelines in contractual and administrative fields together with laying down code of professional ethics and integrity for the officers and supervisors for taking decisions in complex and contradicting situations.

4.5 Process vs Product: Quite an old debate that whether process (plan preparation and tender processes) is important or the product (project award and implementation) has become more relevant today in the context of implementing new contract and project structures listed out at para 2 and 3 above. Organizational objective is to move forward and implement some projects quickly so that lessons can be learnt for further implementation in a bigger way. But the experience so far shows that we are more often stuck either at the plan preparation stage or the tender stage. Diligently prepared plans are of no use if in the process project becomes financially unviable while accommodating demands of various departments in Railway. Similarly voluminous tender evaluation notes are of little use if it results in discharge or rejection of all tenders. While dealing with new contracting structures or new bid documents or new types of projects one may encounter several situations where things are not clearly laid down in black and white but are in grey. In such situations professional ethics demands that engineers must focus on completing the transaction with openness, fairness to all, transparently and without favouring anyone and in the process selecting the best consultant/contractor/developer at the best financial terms on offer and not resort to delaying or redoing the process. Organizational learning will happen only when new forms of projects are executed to the best of knowledge available. But more often on the pretext of fear of vigilance, but may be either due to fear of unknown or inherent resistance to such new project types, some officers keep focusing on the process instead of the product.

4.6 Personal vs Organizational Opinion: For introducing any new development and investment model in Railways we have to take timely decisions on policies and implement them. But as is natural there might be divergence of opinions among officers working in an organization or a unit. Our Service Conduct Rules allow each of them to express their opinion and act to the best of his judgment and in the process various wings of the unit might differ to

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the parts of the draft policy. However, professional ethics demand that when, after free and frank deliberations in meetings and on files, a decision is taken by the competent authority to the best of his judgment, that must be honoured by all and implemented by each one in the organization without direct or indirect opposition. But often this doesn’t happen and those, whose opinions do not fully align with the decision, keep obstructing the policy implementation in various means available to him. This is against professional ethics and need to be discouraged through code of professional ethics and counseling if Railway has to move ahead in adopting modern development and investment models including higher levels of contracting structures discussed above.

5.0 Conclusion

In order to keep pace with the growth of the country and other infrastructure sectors in India, Indian Railways has to grow rapidly for which it has to generate alternate resources like leveraging and exploiting surplus railway land for carrying out various projects. Further it has to develop its project management capabilities by deploying PMC in select projects and carry out much needed changes in its contracting system. For executing bigger and complex railway projects Indian Railways has to adopt better contracting structures involving greater delegation of risks to contractors. But these measures will not be enough to fulfill the massive funding requirements and almost 50% investment has to be attracted from private sector. For this, major thrust will have to be given to Public Private Partnership models of development of projects. Railway sector PPP is unique and it doesn’t even compare with international railways and Indian Railways will have to develop its own customized models of PPP for taking up railway projects. This requires massive capacity development program in the form of training of engineers in multiple disciplines and standardizing contract documents. Newer project structures bring forward conflict in opinions among officers which act as retarding forces. Hence a code of professional ethics is required to be developed which railway engineers have to follow to negotiate with conflicting choices.

1 ‘Item Rate’ for site preparation and miscellaneous works, where work is not defined in advance; ‘Build to Design’

for elevated corridors where standard design of girders are used; ‘Design and Build’ for the first two under ground metro contracts MC1A and MC1B; Subsequent underground metro contracts of Phase-I on ‘Build to Design’; Underground contracts in phase-II on ‘Design and Build’; ‘Design, Build, Finance, and Operate’ Concession for Airport Line excluding civil structure, which was done on ‘Design and Build’ contract. 2 Vide letter no. ERB-1/2008/23/4 dated 06-02-2008, with Shri J.S. Sondhi, then EDCE (B&S) II, Railway Board as

convener and 4 members- Mrs. Vijaya Kanth, FA&CAO, Southern Rly, Shri P.V. Vaidialingam, EDF(X)-I, Railway Board, Shri Rajesh Argal, Chief Engineer(Con.), S.Rly, and Shri Anil Kumar Gupta, GM/RLDA. 3 QCBS and CQCCBS terms are as per the ‘Manual of Policies and Procedure of Employment of Consultants’ dated

31.08.2006 issued by the Ministry of Finance which contain detailed guidelines for selection of all types of consultancies. 4 Vinay Kumar Singh, Director(PSU), Railway Board as convener and 7 other members- Rajesh Agarwal, Director

(WCS), Railway Board; Pramod Sharma, OSD/ME (Kashmir Project), Railway Board; Ramashray Pandey, OSD/ME, Railway Board; Venu Gopal, General Manager/Highways, Ircon International Ltd.; S.K. Kapoor, Addl. General Manager (CP), RITES; Anil Kumar Gupta, GM/ RLDA; S.K. Dhiman, Executive Director (P), RVNL. 5 Gupta, Anil Kumar and Prof G. Ramesh, 2010, ‘Project Management Control System of Infrastructure SPVs:

DMRC-A Case Study’, page 20-50, Public Private Partnership, Book published by Routledge and Taylor, New Delhi &

London. 6 No. 2012/CE-I/CT/O/20 Dated 10.05.2013 vide which one qualified Diploma Engineer is to be deployed by a

contractor for works costing more than Rs. 25 lakh but less than Rs. 2 crore and a Degree Engineer for works

costing Rs. 2 crore or more.

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7 Public Private Partnership is a medium to long term relationship between the public and private agencies

involving transfer of risks and rewards between them, allocation of responsibilities between parties based on

efficiency, contract based on life-cycle responsibility and output specifications rather than on construction cost and

input specifications. 8 A joint venture of Ircon International Ltd. and RLDA in the ratio 51:49, created on 12.04.2012, and which has

been assigned five railway stations Chandigarh, Bijwasan, Anand Vihar, Habibganj and Shivaji Nagar (Pune) for

development/ re-development by RLDA on the authority given by Railway Board. 9 Gupta, Anil Kumar and Prof Shyamal Roy, 2008, ‘Public Private Partnership in Railways-A New Approach’, IIMB

Management Review, March 2008.