Privatisation of Indian Railways: Challenges & Prospects - Daily Current Affair Article for UPSC, IAS, Civil Services and State PCS Examinations

Why in News?

  • Indian Railways, in a bid to provide world-class travel experience to passengers, has been working closely with NITI Aayog to streamline the process of allowing private sector to run trains on the network.
  • Ministry of Railways has invited Request for Qualifications (RFQ) for private participation for operation of passenger train services over 109 Origin Destination(OD) pairs of routes through introduction of 151 modern Trains (Rakes), a project that would entail private sector investment of about Rs 30,000 crore.

Background

  • Indian Railways network is about 68,000 route kilometers. In the year 2018-19, the reserved passenger volume was 16% (0.59 billion) of the total originating non- suburban passengers (3.65 billion). Almost 8.85 crore of waitlisted passengers could not be accommodated.
  • Ministry of Railways felt the requirement to introduce private participation in passenger train operation which will allow introduction of next generation technology and provision of higher service quality, ensuring use of improved coach technology and reduced journey time. In this direction, RFQ has been already invited to permit private entities to undertake passenger trains operations.
  • These train services would be operated on the Indian Railway Network where at present both passenger and freight trains are being operated on the common track. The major trunk routes are saturated and operate at near full capacity. However, with planned commissioning of Dedicated Freight Corridors in 2021 and other infrastructural works, there would be availability of additional paths for operation of additional passenger services and it would therefore be possible to run additional services utilizing modern trains proposed in the current initiative.
  • The private entities for undertaking the project would be selected through a two-stage competitive bidding process comprising of Request for Qualification (RFQ) and Request for Proposal (RFP). RFQ process will be for pre-qualification and shortlisting of the bidders will be based on their financial capacity, who will be required to offer share in the Gross Revenue at RFP stage (bid parameter) for undertaking the project.
  • The initiative for private investment for running passenger trains began in a limited way last year with the Indian Railway Catering and Tourism Corporation (IRCTC) - a Railways subsidiary - introducing the Lucknow-Delhi Tejas Express. Currently, IRCTC operates three trains - the Kashi Mahakal Express on the Varanasi-Indore route, the Lucknow-New Delhi Tejas and the Ahmedabad-Mumbai Tejas. These are the only ones not run by the Indian Railways itself, as has been the practice in its 167-year history.
  • At present, scheduled passenger train services remain paralysed during the COVID-19 pandemic, and various railways have been running only specials such as those for workers. Yet, the Railway Board has moved ahead with a long-pending plan, setting a tentative schedule for private train operations, expected to begin in 2023 and in 12 clusters.

Terms of Conditions: Private Players

  • This is the first initiative of private investment for running passenger trains over Indian Railways network.
  • The 109 OD Pairs have been formed into 12 Clusters across the Indian Railway network. Each train shall have a minimum of 16 coaches.
  • Majority of trains to be manufactured in India (Make in India). The private entity shall be responsible for financing, procuring, operation and maintenance of the trains.
  • Trains shall be designed for a maximum speed of 160 kmph. There would be a substantial reduction in journey time. The running time taken by a train shall be comparable to or faster than the fastest train of Indian Railways operating in the respective route.
  • The concession period for the project shall be 35 years.
  • The private entity shall pay to Indian Railways fixed haulage charges, energy charges as per actual consumption and a share in Gross Revenue determined through a transparent bidding process.
  • The private entity shall have the freedom to decide on the fare to be charged from its passengers.
  • These trains shall be operated by the Driver and Guard of Indian Railways.
  • The operation of the trains by the private entity shall conform to the key performance indicators like punctuality, reliability, upkeep of trains etc.
  • Operation and maintenance of the passenger trains would be governed by standards & specifications and requirements specified by Indian Railways.
  • These trains are going to run on the routes where there the demand for trains are already higher than the existing capacity.
  • Railways shall provide a nondiscriminatory access to the trains operated by the private entities with no new similar scheduled train departing between the same stations within 60 minutes of the scheduled departure of the private train.
  • It proposed the following routes for long distance travel: DelhiMumbai, Delhi-Lucknow, DelhiJammu/Katra, Delhi-Howrah, Secunderabad-Hyderabad, Secunderabad-Delhi, Delhi- Chennai, Mumbai-Chennai, Howrah-Chennai and HowrahMumbai.

Significance

  • Several committees have gone into the expansion and the modernisation of Indian Railways. In 2015, the expert panel chaired by Bibek Debroy constituted by the Ministry of Railways a year earlier, 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.
  • An analysis of passenger and freight operations in the Railways, taken note of by the Economic Survey and the erstwhile Planning Commission, showed that a steady shift to other modes of travel for both categories was affecting economic growth: by as much as 4.5% of Gross Domestic Product (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.
  • The objective of this initiative is to introduce modern technology rolling stock with reduced maintenance, reduced transit time, boost job creation, provide enhanced safety, provide world class travel experience to passengers, and also reduce demand supply deficit in the passenger transportation sector.
  • From a passenger perspective, there is a need for more train services, particularly between big cities. The Railway Board says five crore intending passengers could not be accommodated during 2019-20 for want of capacity, and 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.

No Privatisation

  • There is no proposal to privatise the operations of Railways. However, there is a proposal to outsource the commercial and on-board services of a few trains and to permit private players to induct modern rakes to run trains on select routes with an objective to provide improved service delivery to passengers.
  • The responsibility of train operations and safety certification rests with Indian Railways. Outsourcing of certain services like station cleaning, pay and use toilets, retiring rooms, parking and platforms maintenance etc. is being done on need based manner to improve cleanliness and other services.

Way Forward

  • The 2019-20 budget had pegged the national transporter’s requirement of infrastructure investment at Rs 50 lakh crore over 12 years, thereby necessitating the involvement of private players in the sector.
  • Train services operated by Indian Railways cover several classes of passengers, 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. But, private operators are not expected to shoulder the burden of universal service norms, and will focus on revenue.
  • So private operators would have to raise the level of their offering even higher, to justify higher fares, and attract a segment of the population that is ready to pay for this difference. The government would have to explain that it has monetised its expensive fixed assets such as track, signalling and stations adequately for the taxpayer, who has paid for them.
  • Therefore, the key piece in the scheme is the independent regulator, recommended by expert committees. Before the pandemic struck, the Government of India said in the Lok Sabha that it had notified the resolution to set up a Rail Development Authority as a “recommendatory / advisory” body, advising 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 unbundling of the monolithic Indian Railways, although the more attractive parts are being opened for private exploitation.

General Studies Paper III

  • Topic: Infrastructure: Energy, Ports, Roads, Airports, Railways etc.
  • Topic: Bilateral, Regional and Global Groupings and Agreements involving India and/or affecting India’s interests.

Mains Question:-

  • Inviting private players to operate on its routes, Indian Railways is taking major reform steps to a more efficient organisation, while not surrendering its control. Discuss