The Ministry of Railways recently initiated plans to privatise part of the railway operations in India. This move was marked by inviting private players to provide their Request for Qualifications (RFQ) for operating passenger train services.
Details about the Privatisation Project
The privatisation project will see about 151 modern trains being introduced and 109 pairs of routes being designed for private operation. Train sets are expected to be procured and maintained by private operators. The proposal also highlights that fares in private trains will be competitive, taking into consideration the prices on other modes of transport like airlines and buses. Private participation in passenger train operations will only account for 5% of the total operations, leaving 95% of the trains still run by Indian Railways. An estimated Rs. 30,000 crore private sector investment is anticipated from this project.
The Reason Behind Privatisation
The aim of privatising the railways is to develop India’s railway infrastructure to efficiently cater to all passengers. The Railways transported 8.4 billion passengers in 2019-20; however, approximately five crore passengers couldn’t be accommodated leading to dropped wait-listed tickets. During busy seasons, nearly 13.3% passengers were not able to get confirmed reservations. It’s expected that the induction of modern technology will reduce transit time and bridge the demand-supply gap in train tickets.
Benefits of the Privatisation
Privatisation promises benefits such as confirmed tickets, faster trains, enhanced safety and additional amenities for passengers, and a reduction in the maintenance cost of train coaches. Currently, train coaches require maintenance after running 4,000 km, but modern coaches would need maintenance after every 40,000 km or monthly. This will help cut railway losses currently incurred in passenger services. The Railways will earn revenue from fixed haulage charges, energy charges, and a share in the gross revenue provided by the private entity. The RFQ is issued under the Make in India policy, which will help create jobs and boost local component manufacturing.
Challenges Surrounding Privatisation
Though promising in many ways, privatisation has raised concerns about potentially higher fare prices and job losses. Further, there’s apprehension over the impact on marginalised communities who enjoy reservations under government jobs but might not have similar provisions in the private sector.
Privatisation Requires a New Framework
The privatisation of railway operations necessitates a new institutional framework. The infrastructure will remain a government monopoly while service provision becomes a marketplace. Rather than outright privatisation, it might be suitable to corporatise core railway functions. Corporatisation transforms a state-owned organisation into a corporation with a board of directors, management, and shareholders—with the government as its only shareholder. Modernising railways is vital, and measures should be implemented to offset social costs promptly so that railway resources are optimally allocated, and facilities are upgraded timely.
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