A host of issues including the lack of a regulator has kept the private investors away from the government’s maiden attempt to privatise passenger train operations, according to industry experts.

More than a dozen firms were qualified for the tender, but all except two backed out without placing financial bids citing lack of commitment by the Indian Railways to accord priority to private trains on departure and arrival, maintenance slots, platform allocation, and station halts along a route on which Railways also ran trains. Besides, the Railways wanted private firms to submit a bank guarantee of ₹100 crore as a performance security.

“This is a whole new ground that you are testing, where everything is stacked against the concessionaire. On top of that, the Railways are asking for a ₹100 crore bank guarantee. When a train arrives late, we are supposed to give some penalty. The running of trains is totally in the hands of the Indian Railways. How do I as a concessionaire guarantee that Railways will bring my train on time and not put the blame on me for being late for which I will have to pay penalty,” said an executive with India’s top infrastructure group. Being a monopoly, giving priority to private passenger trains on platform availability, maintenance pits etc, haven’t got into their system, he stated.


While the rates were to be decided by the private operator, Railways did not give a formal commitment on not interfering in the rating structure.

The investors were not sure of their earnings after paying haulage charges, revenue share and station usage charges to the Railways out of the money collected from the passengers.

The bidders wanted to levy an additional amount from the passengers in line with the practice prevailing in airports, which was not agreed to. “If you look at the cost, ₹100 crore as performance security, each rake is about ₹80-90 crore, the cost involved in running our own maintenance depots, sourcing crew from the Railways and the requirement to keep spare train/coaches, the private sector realised that the cost and the rate of return were not matching at all,” said an executive with another firm that had participated in the tender. “All these issues scared the private investors away. Now they will have to ease off all these issues,” he added.

“Flexibility in operations was limited and the capital requirements was quite significant,” said Jagannarayan Padmanabhan, Director and Practice Leader, Transport and Logistics, CRISIL Infrastructure Advisory. “The process also got impacted due to Covid as many bidders were not able to completely model the traffic forecast to a certain degree of comfort,” he added.

Also read: IRCTC’s unfair advantage in private train bids

Lack of clarity

Private firms also said that the Railways “were not clear about the whole concept” compared to the user-friendly policy on running freight wagons.

“The passenger train segment is much more complicated because the unit here is a passenger and not freight. To address his requirements, our backs are totally against the wall. With all the costs involved, investors realised that the rake lifetime will be over in 20-22 years, and we will still be in the negative,” said an executive with a firm that participated in the process. “The trust deficit that exists between the Indian Railways and the private sector is so huge, and we have been clamouring for a regulator to give us some comfort level on issues that crop up during the course of the concession, but that also has not been forthcoming in spite of announcement in Parliament,” he said.

The Railways, he claimed, is reluctant to bring in a regulator because the monopoly of being an operator and a policymaker will get undermined when there is a regulator.