Privatisation of Indian Railway


Recently, the NDA government has laid the roadmap for long-term partnerships with the private sector to upgrade the country’s railway system.

Need for Private Players in Indian Railways

  • It is estimated that almost 70 per cent of freight trains, which now jostle for space with passenger trains on the overcrowded Indian Railway network,
  • It is estimated that the network of freight trains will shift to the two upcoming Dedicated Freight Corridors from December 2021 which will free up a lot capacity to introduce more passenger trains with better services and higher speeds.
  • The demand for train seats is much more than available, on all busy routes and it results in waiting lists, overcrowded trains, and even losing business to other modes like air and road.
  • The introduction of new, modern trains requires heavy investment in rolling stock like coaches and engines.
  • The upgradation of facilities, such as better onboard services and faster trains, would entail a huge modernisation expense for Indian Railways.
  • The running of passenger trains is a loss-making business for Indian Railways as it recovers only around 57 per cent of the cost through tickets on an average.
  • In order to cut its losses and convert that opportunity into a money-making enterprise, the government has decided that some of the trains to be introduced in the future will be run by private companies.

Government’s Model for Privatization of Indian Railways

  • The move envisages a total investment of around Rs 30,000 crore into the railway system through rolling stock and other expenditure, to be borne by the private players.
  • The idea is to give passengers an option of superior train services without the Railways having to spend any money for it.
  • The government panel on privatizing Indian Railways has decided into theredevelopment of railway stations through private participation.
  • The government has identified 109 busy routes across India to run 151 private trains for 35 years as these routes with huge waiting lists and offer a potential to earn.

Benefits for Indian Railways from Private Players

  • In this business model, the private operator is supposed to share revenues with Railways as qualifying company that agrees to share the maximum percentage of the yearly revenue with Railways will win the bid.
  • The Railways will also get a standard haulage charge, akin to track access charge on a per-km basis.
  • The Railways has also set certain key performance indicators for the private player, like punctuality, reliability and maintenance of trains.
  • The Railways will meet its end of the bargain by ensuring that its systems and infrastructure are kept well-oiled for private trains to operate in an enabling environment.

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