- In this article the author highlights the pros and cons of Privatising railways and the need to weigh both carefully.
What does Privatisation mean?
- The transfer of ownership, property or business from the government to the private sector is termed privatization.
- In India, the selection of private parties using the tendering process for privatisation of Railways proposes a two-stage competitive bidding.
- While short listing will be based on financial capacity (with sharing of gross revenue), the selected parties can fix fares by themselves.
- These parties have to pay fixed haulage charges (charge for commercial transport of goods), energy charges based on actual consumption, and a share in gross revenue through the bidding process.
- The main criterion is procurement of coaches by the concessionaire and form them into rakes of 16 coaches each, with maintenance at 10 major stations from where the trains will operate to their destinations.
- For maintenance, existing depots and yard facilities at different stations will be made use of.
- The project entails a total investment of ₹30,000 crore by private enterprises. The cost of investment at each of those stations varies from ₹2,300 crore to ₹3,500 crore.
Arguments in favour of railways privatisation
- Introduce modern technology rolling stock with reduced maintenance
- Reduce transit time
- Boost job creation
- Provide enhanced safety
- Provide world class travel experience to passengers
- Reduce demand supply deficit in the passenger transportation sector.
Arguments against railways privatisation
- Leads to dual control and split responsibility
- Results in higher fares
- Repercussions in terms of maintenance and operations.
- The United Kingdom and Japan have privatised their rail systems completely but most countries have retained their rail networks for public convenience.
- According to the proposed model, railway crew will work the trains (151 trains in 109 routes) which will be maintained by the private investor. It will lead to dual control and split responsibility.
- The responsibility of the private investor ends with investment in the procurement and maintenance of coaches while train operation, safety and dealing with every day problems rests with the Railways.
Speed and changes
- While raising the maximum running speed to 160 kmph is a welcome measure, accomplishing this in the time frame given will be difficult.
- In the proposal the Railways or government have no role in fixing passenger fares while full liberty is being given to the concessionaire to unilaterally fix fares for these proposed trains that are on a par with air and air conditioned bus fares which will be beyond the common man’s reach.
- The very objective of commissioning the Railways as a public welfare transport organisation is defeated.
Deprive employment opportunities
- The private investor is not bound to follow reservation regulations in employment, in turn depriving employment opportunities for those who are on the margins of society.
An ideal PPP model
- The government can consider well an alternative model instead of the proposed one.
- For example, metro railway services (Hyderabad, for example) are ideal PPP (Public Private Partnership) projects. The concessionaire is solely responsible for daily maintenance, operation, passenger amenities and staff issues. The State government steps in when it comes to land, power, permissions, law and order, etc. Fare determination is in consultation with the government.
- Indian Railways should go in for state-of-the-art coach designs using ‘transfer of technology (ToT) with world leaders to make coaches in India of international standard.
Improved Infrastructure to meet target
- To raise the existing speed limit of 110 kmph to 160 kmph, as proposed, there has to be track strengthening, elimination of curves and level crossing gates and strengthening of bridges.
- It also calls for track fencing especially in densely populated areas.
- Indian Railway Catering and Tourism Corporation, a government undertaking which has gained experience in running the Tejas Express trains can be entrusted so that there will be ‘unity of command’ in maintenance, operation and passenger services under the single administration of the Railways and its undertaking.
- The Indian Railways is a strategic resource for the nation and provides a vital public good. With its vast network across the length and breadth of India, it is not just a mere transporter of passengers and goods but also a social welfare organisation.
- Hence, it should not be judged solely on its profit-generating capability or market-based return on investment.