indian-railways-opening-doors-for-private-players

Context: Indian Railways has launched the process of opening up train operations to private entities on 109 origin destination(OD) pairs of routes using 151 modern trains. 

More on the news:

  • At present, scheduled passenger train services remain paralysed during the COVID-19 pandemic, and railways have been running only specials such as those for workers. 
  • In this backdrop, the Railway Board has moved ahead with a long-pending plan, setting a tentative schedule for private train operations, expected to begin in 2023. 

Background:

  • Several committees have gone into the expansion and the modernisation of Indian Railways. 
  • In 2015, the expert panel chaired by Bibek Debroy recommended that the way forward for the railways was “liberalisation and not privatisation” in order to allow entry of new operators “to encourage growth and improve services.” 
    • It also made it clear that a regulatory mechanism was a prerequisite to promote healthy competition and protect the interests of all stakeholders.

Current scenario:

  • The IRCTC, in which the government is the majority shareholder, was given pilot Tejas operations in the New Delhi-Lucknow, and Mumbai-Ahmedabad sectors. 
  • These were the first trains allowed to be run by a ‘non-Railway’ operator. 
  • The present move takes another step towards competing passenger train operations, bringing new-generation trains and attracting investments of an estimated ₹30,000 crore.
    • According to Railway Board, the present invitation constitutes only a fraction of the total train operations - 5% of the 2,800 Mail and Express services operated by Indian Railways.

The significance of the move: 

For passengers: 

  • To introduce a new train travel experience for passengers, with better and more train services,  who are used to travelling by aircraft and air-conditioned buses.
  • Building capacity: In 2019-20, there was 13.3% travel demand in excess of supply during summer and festival seasons. Without an expansion, and with growth of road travel, the share of the Railways would steadily decline in coming years.

For Indian Railways:

  • Indian Railways: a closer look
    • According to the World Bank, in 2018 India had 68,443 route kilometres of railways. It is among the four largest rail networks in the world, along with the United States, China, and Russia. 
      • Although every kilometre of track in India covers geographical area much less than Germany, Russia, China or Canada, indicating scope for expansion.
    • According to the Economic Survey, a steady shift to other modes of travel for both categories(passenger and freight) was affecting economic growth by as much as 4.5% of GDP-equivalent. 
    • It was estimated that a one rupee push in the railway sector would have a forward linkage effect of increasing output in other sectors by ₹2.50. 
    • The Debroy committee found this significant to take the ‘Make in India’ objective forward. 
      • The panel also noted that passengers were willing to pay more, if they had guaranteed and better quality of travel and ease of access. 
  • The move to augment capacity virtually overnight through private capital in train operations pursues this line of reasoning.

Difference between private and public operation:

  • Indian Railways meeting the social service obligation: To connect remote locations, and adopting the philosophy of cross-subsidy for passengers in low-cost trains through higher freight tariffs. 
    • In more recent years, it has focused on revenue generation through dynamic demand-based pricing.
  • Focus on revenue: Private operators are not expected to shoulder the burden of universal service norms, and will focus on revenue. 
    • Even the first IRCTC-run trains have a higher cost of travel between Lucknow and Delhi than a Shatabdi train on the same route that almost matches it for speed. 

Way ahead:

  • An independent regulator: Before the pandemic struck, the Government of India had notified the resolution to set up a Rail Development Authority as a “recommendatory/advisory” body.
    • The body will advise the government on, among other things, promoting competition, efficiency and economy, and protecting consumer interests. 

Private rail operations can thus be seen as a government-led pilot plan, not a full programme for privatizing the monolithic Indian Railways, opening the more attractive parts for private exploitation.

Source: https://www.thehindu.com/business/Industry/the-hindu-explains-why-has-indian-railways-opened-doors-for-private-players/article31991149.ece#:~:text=The overall objective, however, is,services, particularly between big cities.