Railways’ move to open 109 routes to private trains must be carefully managed

The Centre’s move to open up 109 route pairs in 12 clusters to 150 ‘modern, world-class’ private trains could set off a major transformation in passenger rail travel. The Railway Board contends that, besides providing quality services at ‘competitive’ rates, not only vis-a-vis existing trains but also air fares and AC buses, the move will help plug some of the losses in the passenger services segment. The private bidders are expected to ‘invest’ ₹30,000 crore, possibly allowing the funds-strapped Indian Railways to undertake capital expenditure in other areas. However, the financials of the move are not wholly clear at this stage. The Centre is likely to encourage global OEM players to produce train sets with localisation norms, possibly aimed at technology transfer. The Railways needs to produce superior engines and coaches, both in terms of safety, efficiency and speed if it is to regain passenger share lost to road and air travel — a move that is desirable from the energy efficiency viewpoint. Track quality, signalling and maintenance need to match these changes. However, the Centre should be more transparent about the revenue sharing norms and the bidding criteria, putting out in the public domain a document akin to the model concession agreement prepared for PPPs in roads. Apart from making the deliverables on services, finance and technology clear, the issue of liability in the event of a mishap needs to be spelt out. Private trains will be feasible if they raise the quality of service and provide the Railways with much needed funds.

The Railways has used its freight earnings to cover up for its loss-making passenger segment, in the process losing freight traffic to the road sector over the decades. With passenger and freight volumes stagnating in recent years, its finances are further strained. With expenditures on salaries and pensions rising, the Railways ends up using its internal resources to meet operational expenses and increasingly relies on market borrowings, apart from budgetary support, to undertake capital spending. Whether private participation in the 109 high density routes identified (whose earnings are likely to be better than the national average) can make a difference here is a moot issue. The Railway Board should explain the expected increase in earnings and the underlying assumptions of traffic growth. Toll road projects have run aground because of ambitious traffic projections. Some of the identified routes, such as the Delhi-Mumbai segment, are already profitable at present, with the Rajdhani on this route being India’s most profitable train. Unless traffic growth is healthy, the overall surpluses will not rise. All stakeholders — producers, consumers and government — will be worse off.

India should learn from its mistakes in opening up telecom and aviation, and ensure that the social goals of the rail network do not suffer. The opening up of rail services can usher in modernisation and efficiency, provided it is managed well.