PRIVATIZING Indian Railways.

The Railways should build tracks and infrastructure and leave private operators to promote competition, efficiency and to protect consumer interest, writes Priyan R Naik.

There are inescapable challenges the Indian Railways needs to face in these trying times. While the Covid-19 pandemic rages mercilessly, the significant loss in passenger revenues, deep-rooted corruption, incapable contractors, efforts by Naxals and anti-social elements to sabotage tracks are some of the other challenges confronting the Indian Railways. In all this disruption, the Railways have come out with a significant announcement. In its 167 years history this is possibly the first time the railways have spelt out a progressive route to privatization, which is bound to open up better vistas for the Railways, ensuring more jobs and better infrastructure.

Private passenger trains are already running on the Indian Railways network, but they are not truly private, since the trains are owned by the Indian Railway Catering and Tourism Corporation (IRCTC), a subsidiary of the Railways. The Tejas Express trains run by IRCTC were the first step to let others run passenger trains on the Railway network. While the locomotives, coaches, drivers and guards are provided by the Railways, the passenger experience, inside the train compartment, services, ticketing, catering and housekeeping is provided by IRCTC. These trains are definitely different with on- board service provided by airline-style hostesses, unlike the regular trains operated by the Indian Railways. The Tejas Express run by IRCTC has made the railways more confident about letting other private players operate passenger trains.

An announcement by the Indian railways launched the process of opening up train operations to private enterprises, when they invited a 'Request for Qualifications' from private entities to operate modern train services on existing rail infrastructure. Train operations required are for 109 origin - destination (OD) pairs of routes using 151 modern trains. The railway board has a tentative schedule in mind with 5% of the 2800 Railway's Mail and Express services to be operated in 12 clusters.  This is very significant step for the Indian Railways to bring in competing passenger train operations, bringing in new technology and new generation trains and attracting investments in to this sector. The Railway Board had earlier indicated that five crore passengers could not be accommodated during 2019-20 for want of capacity, with a 13.3% travel demand in excess of supply during summer and festival seasons. From a passenger perspective, therefore, there is a definite need for more train services, particularly between big cities.

Undoubtedly, privatization will be a very significant change for the railways. We must not forget that with its route length of 67, 415 Kilometers, the Indian Railways is one of the world's four largest rail networks. But today, it faces acute competition with passengers and freight shifting to other modes of travel. With a steady growth of road infrastructure, the railway's share is declining steadily. Besides investment coming from the private sector is always welcome. Even before Covid- 19 came into the picture, earnings from both passenger fares and cargo were way behind budget projections, now due to the lock-down, the railways will end this fiscal year with a whopping deficit. It is well known that the Railway's Operations Ratio is under severe stress because it has to spend significant sums on pensions, salaries and on getting stations cleaned. Outsourcing contracts for cleaning operations necessitates huge operating costs requiring further budgetary allocations.

The existing network currently gives very little time for track maintenance and badly needs decongestion to prevent bottlenecks and crowding.  The Railways safety record is also dismal and needs immediate improvement. The capital expenditure requirements for track renewal, electrification, and ongoing projects therefore, cannot be compromised and will continue to make a huge dent in the Railways capital budget allocation.

But privatization is not going to be easy to implement - firstly it is going to create class ¬divisions among passengers. Just like the private and government hospitals, the railway - run trains, will become the poor man's train and the private trains with better seating, cleanliness, more facilities along with a higher fare will become the rich man's trains. What about the chaos and confusion when you have two types of fares and two types of trains between the same origin - destination pair of cities? How will these fares be fixed? An Independent Regulator like a Railway Development Authority will need to be appointed as an advisory body to fix tariffs. 

Several questions that need answers remain. Why should passengers, who have by now got used to traveling by aircraft and air conditioned buses travel by a privately run train and that
too after paying a premium fare? It is not as if the train will be faster than a Gatimaan or a Shatabdi Express on the same route, nor will private trains have precedence and the first right of way, for whether private or government, the trains will run as per railway guidelines. Will the private operators be able to raise their level of offering to justify these higher fares? If higher fares are needed to cover costs, wouldn't it bring them in direct competition with airlines, pricing them out of the market? Given these conditions will suitable private operators come forward to run trains?  How will you make sure private players, realizing how difficult it is to work with the railways, not abandon their routes midway? How will private players compete and find financially viable routes when the Railways cross-subsidize passenger fares through freight revenue?

We all know that the Government builds airports and roads but does not own and operate every vehicle or airline company that uses these facilities. In the future the Railways should build tracks and infrastructure and leave private operators to promote competition, efficiency and to protect consumer interest. The
privatization project announced by the railways therefore can be considered a pilot project
to study how private operators take care of the premium segment while the Railways provide more services to the common man. No doubt there will be initial confusion with fare structures and rights of way but these will get sorted out eventually. A working model where the Railways provides the infrastructure and the private operator focuses on revenue should be successfully instituted. Hopefully this small beginning will herald in a new phase for passengers in terms of comfort, safety and amenities, truly making 'travel a pleasure'.

Priyan R Naik

The writer is a Former Member of the Board of Directors of BEML Limited, a Government of India Undertaking under the Ministry of Defence. Currently he is a columnist and writes regularly for the Deccan Herald, Hindu Business Line, Times of India, Navhind Times, ET, The Daily Star, Dhaka, Bangladesh, among other prominent newspapers and magazines.

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