Rail Bhavan technocrats are not very happy about the way the dedicated railway freight corridor project is being implemented. Their main demand is that the project entailing an investment of over Rs 20,000 crore (Rs 200 billion) should be set up within the Indian Railways system.

This alone, they argue, will ensure better co-ordination and take advantage of the obvious synergies between the existing railway system and the new freight corridor network.

The view does not have too many takers. The Planning Commission, for instance, believes that the project should be set up as an independent entity. Already, a compromise formula has been worked out. A new outfit with equity stakes held by Indian Railways and other agencies working under various user ministries will implement and run the freight corridor project.

The Prime Minister's Office has also endorsed this proposal and even mandated that the Railway Ministry's representation on the board of the new company should be kept to the minimum. The objective is to run it primarily to serve the interests of users and not just of the service providers.

Clearly, Rail Bhavan technocrats are in a minority within the government system. Nevertheless, it will be useful to examine in detail the arguments put forward by them.

The first argument is that the freight corridor network will attract more cargo because of its obvious advantages, thereby robbing Indian Railways of a large chunk of cargo business that it would have got otherwise.

In the process, you might see a further weakening of Indian Railways. This is how, the argument goes, the government has emasculated many public sector undertakings and Indian Railways will be one more example of such a lop-sided policy.

This argument has less economic merit and appeals more to the heart. The Left parties will love to espouse this cause. But the argument loses its steam particularly at a time when Indian Railways is doing so well on freight movement. So, why should it worry if the freight corridor network takes away a part of its business?

In an economy growing at over 8 per cent, getting more freight should not be a problem particularly for Indian Railways with its obvious cost advantages. Instead of fretting over the loss of an opportunity to expand its empire, it might do well to focus on how it could offer more competition to the road transport network and grow even faster.

The second argument has obvious economic merits. It is pointed out that the freight corridor network will neither be connected to centres from where goods originate nor will it be linked to their final destination points. In other words, to be successful, the freight corridor network will need feeder services to connect it with both goods originating centres like ports or factories and final destination points where the goods are consumed.

There are two ways this vital link can be provided. The freight corridor network can tie up with a clutch of road transport companies. But this is not a cost-effective way.

Moreover, it can create problems associated with multi-modal transportation. So, a more efficient way will be to permit the freight corridor network to link up with Indian Railways.

In such a scenario, the latter will bring goods from ports and factories to connect them with the freight corridor at one end. At the other end also, the railways will offload those goods from the freight corridor and transport them to the final destination or consuming centres.

If there are proper railway track alignments between Indian Railways and the freight corridor network, the same wagons can move from the ports to the consuming centre even while taking full advantage of the fast-moving freight transport system.

But there is a problem. Who will determine the movement of wagons from the railway system to the freight corridor network? More importantly, if the freight corridor project is an independent network, who will decide the revenue to be shared between the two entities? Railway Ministry officials argue that even now it is the traffic division in Rail Bhavan that supervises the movement of passenger and freight trains from one zone to the other.

In fact, the traffic division in Rail Bhavan functions exactly like the Air Traffic Controller in the civil aviation sector, deciding which plane belonging to which airline has to be given the right of landing or take-off, depending on the availability of space in air or on the tarmac.

The question, therefore, is: Who should play the role of the wagon traffic controller for movement of goods trains from Indian Railways to the freight corridor network? One view is to let the traffic division in Rail Bhavan take this additional responsibility and see how fairly and correctly it shoulders it.

But the government should look at the freight corridor project as an opportunity to usher in the much-needed organisational reform in the Indian railway system. Having won the first battle by creating a separate entity for the freight corridor project, it is now time to insist on an independent traffic regulator.

Over time, this regulator can be given the additional responsibility of determining the movements of wagons and trains belonging to the Indian Railways system.

The more crucial question, of course, pertains to the creation of a fair and efficient system of revenue-sharing between the railways and the freight corridor network. Even this job needs to be entrusted with an independent regulator.

So, why not create a composite body that will determine both railway traffic movements and revenue sharing between Indian Railways and the freight corridor network?