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Indian Economic Policy

Notes particular regions and special permission had to be taken for plying beyond the region of origin. The
object of the Motor Vehicles Act was to protect the Railways from the unhealthy competition of
motor transport.
In 1945, the Government of India issued to the State Governments “A Code of Principles and Practices”
for the regulation of road transport. This Code sought the free carriage of all goods other than those
of perishable or fragile nature to a distance of only 75 miles and that beyond this distance permits
should only be issued if the Railways were not able to handle the traffic.
It is thus clear that throughout the Government has been seeking to control road transport with the
object of protecting the railways. This was given clear expression to by Masani Committee : “In
respect of railways and roads, the principle of rail-road co-ordination was accepted long ago, but in
the opinion of the Committee it has not been fairly applied and has been working in a one-sided way
so as to restrict road transport.”
Should Railways be protected against Road Transport ?
The Government has always protected the interests of railways against the competition of motor
transport. Important reasons for this attitude are :
(i) Railways are the predominant system of land transport and they are a vital factor in respect of
Central finance.
(ii) Without effective co-ordination, there would be wasteful duplication with adverse effects on
Central finances.
(iii) Railways are publicly owned, managed and controlled; Road transport should also be publicly
controlled.
(iv) There are two obligations on the railways which do not apply to the roads, viz., (a) obligation to
carry everything that is offered, and (b) prohibition of undue preference and prejudice.
(v) The railway rates are based on the principle what the traffic can bear’ and not on maximisation
of profit.
(vi) The railways carry two types of goods, viz., high rate traffic and low-rate traffic. The low-rate
traffic consists of cheap raw materials such as coal, cement, mineral ores, fertilisers, etc., which
are important for industrial and agricultural production. The railways make up their loss on
such traffic through profit on high rate traffic. If road traffic is allowed to take away the cream
of traffic, then the inevitable result will be the pushing up of the freight rates on lower-rate
goods. This will adversely affect industrial development of the country, and will also have
serious repercussions on regional development as well as exports.
(vii) Above all, the railways have to serve certain vital and national needs even at a loss. This is so
when they have to open up strategic lines and give special travel concessions for social and
national purposes.
Water Transport in India
There are two kinds of water transport—inland water transport or river transport and coastal or
marine transport.
Inland Water Transport (IWT)
Inland water transport (IWT) comprising a variety of rivers, canals, backwaters, creeks etc. is the
cheapest mode for certain kinds of traffic, both over long and short levels, provided the points of
origin and destination are located on water front and no transhipment of goods is involved. Besides,
IWT is one of the most efficient modes of transport from the point of view of energy consumption.
Unlike in other modes of transport, there is practically no investment needed. IWT is also a labour
intensive mode of transport and benefits weaker sections of the community. The only requirement is
navigable water.
At one time, river and canal transport played an important part in the transport system of the country
but since the middle of the last century inland water transport suffered because of the emphasis

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