The bidding for private train operations (PTO) through public-private partnership (PPP) for 12 clusters, for which the Union Government, NITI Aayog and the Indian Railways had done substantial homework since July 2019, ended in an anti-climax. The most obvious reason for this being that IRCTC, the public sector enterprise under the Ministry of Railways, would get the contract for at least two clusters based on the tender quotes opened on July 23, 2021.

The Indian Railways (IR) had invited bids for 12 clusters of PTO, but received bids only for three clusters — Delhi-1, Delhi-2 and Mumbai-2. The winner of the bid in each cluster was to be decided depending on who quoted the maximum revenue share of total revenues with the IR from the PTO in the respective cluster. This is in addition to the haulage charges per train km and energy charges on usage to be paid by the concessionaire to the IR.

The procurement of rolling stock and maintenance and operation of the stock, per the schedule given by the IR for various routes in each cluster till the end of concession period of 35 years, are the sole responsibility of the concessionaire. The concessionaire to whom the PTO is given on PPP may generate revenue from the fare box — based on the prevailing travel demand across modes — and non-fare box.

The IR received the following bids: Delhi-1 cluster — from IRCTC and a private player at a revenue share of 15.30 per cent and 2.16 per cent, respectively; Delhi-2 cluster — from IRCTC and a private player at a revenue share of 6.30 per cent and 0.54 per cent, respectively; and Mumbai-2 cluster — a single bid from IRCTC at a revenue share of 18 per cent.

Now, with the first tendering process for PTO coming to end, IRCTC would get at least two clusters — Delhi-1 and Delhi-2 — to operate and may get Mumbai-2 also, depending on whether the IR accepts a single bid quote or not.

Apprehensions may be raised that IRCTC, coming directly under the IR and having an MoU with the Centre for Rail Information System (CRIS), had more access to rail traffic data than the private players which have been shortlisted to submit their tenders for various clusters.

Once the IR has shared the data required for analysis with all the private players shortlisted to participate in the RFP, the question of IRCTC having more access to rail traffic data from the IR has no validity. Moreover, the traffic demand for PTO is not only arrived from rail traffic data but also from other competitive modes, and it is for the private players to do their due diligence in estimating their revenue and expenditure and arrive at revenue share values.

IRCTC has been in the business of rail transport and allied business for 20 years now, both in terms of operating some premium trains for the public and foreign tourists as well as providing value-added services like catering, packaged drinking water and internet ticketing. Whenever the IR wanted to test the waters on introducing private trains, whether it is Tejas Express, Vande Bharat Express or Humsafar Express, it was first assigned to IRCTC on nomination basis on specific terms and conditions.

It is no surprise that with the kind of exposure IRCTC has, its ability to take calculated risk at least in three clusters of PTO would be much higher than the private players which are new entrants in this business domain.

Enjoying patronage?

However, the question that lingers is: Has the risk-taking ability of IRCTC emerged from it being in the passenger rail business for two decades, or is it also to do with IRCTC being under the Ministry of Railways?

In Budget 2021-22, the Union Government set a disinvestment target of ₹1.75-lakh crore and the government identified some PSEs for partial or strategic disinvestment. The IPO of IRCTC in September 2019, where the IR offloaded 12.5 per cent of its stake at an issue price of ₹315-320, witnessed a record subscription of 112 times.

The subsequent offer for sale (OFS) in December 2020, done at the floor price of ₹1,367, helped the IR offload 20 per cent more. Now, IR has a 67.5 per cent hold on IRCTC.

Taking advantage of the fact that IRCTC bagged at least two clusters (maybe even three) in PTO, the government should go for strategic disinvestment of IRCTC. As on July 23, the day the tender results were out, the price of an IRCTC share was ₹2,325, and it is likely to go up further. Even at this price, the government would be able to garner about ₹25,000 crore. And through strategic disinvestment, where a premium price of 10-20 per cent is possible, the government could get ₹27,000-30,000 crore.

Once IRCTC is divested from the IR, it has to quote based on its inherent strength and that will provide a reasonable level-playing field for other private players who would like to bid for PTO. With no strategic disinvestment of IRCTC, even if the IR goes for re-tendering of the remaining nine or more clusters with or without changed clauses, the tendering process would remain a farce.

The writer is a railway expert

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