Context: Private train operations in the country will begin by April 2023, and the ticket fares in these trains will be competitive with airfares on similar routes, the Railways said on Thursday. Addressing a press conference online, Railway Board Chairman V. K. Yadav said that private players in passenger train operations will mean a quantum jump in technology and coaches that run at higher speeds. His statement came a day after the Railways formally kickstarted its plans to allow private entities to operate passenger trains on its network by inviting requests for qualification (RFQ) for participation on 109 routes through 151 modern trains.
Privatisation Project

• Under this at least 151 modern trains will be introduced and 109 pairs of routes will be planned out for private train operations.
• Train sets have to be brought by private operators and maintained by them.
• Fares in private trains will be competitive and prices on other modes of transport like airlines, buses have to be kept in mind while fixing the fares
• Private participation in passenger train operations will only be 5% of the total operations of Railways. 95% of trains will still be run by Indian Railways.
• The project will bring private sector investment of about Rs. 30,000 crore.

Reason Behind Privatisation

• To develop India’s railway infrastructure to provide travel services to all its passengers.
• According to the 2019-20 data, the Railways ferried 8.4 billion (840 crore) passengers in 2019-20, about five crore passengers could not be accommodated, meaning their wait-listed tickets were dropped.
• During the busy seasons/summer season nearly 13.3% passengers were not able to get confirmed reservations.
• Induction of modern technology and reduction in transit time and the demand-supply deficit in train tickets.

Other initiative of Privatization in Indian Railways

• There are some major factories like Chennai-based Integral Coach Factory (ICF), which is owned by government from which Indian Railways procures trains and coaches.
• It has also produced the coaches of luxury to high-speed trains including Rajdhani Express, Shatabdi Express and the recently-inducted Vande Bharat Express (Train 18)

Benefits

• Confirmed tickets and faster trains for passengers.
• Trains would run faster and would be safer and provide more facilities.
• Reduction in maintenance cost of train coaches.
• The train coaches now required maintenance after they ran 4,000 km, but modern coaches would need maintenance after every 40,000 km or once or twice in 30 days.
• Reduction in railways loss. Currently, the railways makes losses in passenger services.
• Provide revenue to railways for future operations.
• The private entity will pay the Railways fixed haulage charges, energy charges as per actual consumption and a share in gross revenue determined through the bidding process.
• RFQ had been issued under the Make in India policy. So the coaches would have to be manufactured in India.
• This will create jobs and utilisation of local components in manufacturing.

Issues Involved

• There is fear that it will lead to increase in fair prices of rail travel and job losses.
• It will harm the interest of marginalised communities (Scheduled Castes, Scheduled Tribes and Other Backward Classes), who get reservation under the government jobs.
• Currently there is no reservation in private sector employment.
• Financial Viability: There will be questions over the financial viability of some routes which has not been good for Indian Railways in terms of revenue earned in last few years.
• Subsidy by Indian Railway: Railways tend to cross-subsidize passenger fares through freight revenue. This translates to below cost pricing, which will make it difficult for private players to compete.
• Issues associated with higher pricing: The higher fares needed to cover costs by private players might bring them in direct competition with airlines, pricing them out of the market.
• Absence of independent regulator: Further, as the experience of private operators in running container trains suggests, setting up an independent regulator will be critical for creating a level playing field for private players. Currently, the same entity is effectively the policy maker, regulator and service provider, rolled into one.

Pending Provision for Constitution of  Railway Development authority

• Government approved the constitution of the Rail Development Authority (RDA) in April, 2017. The role/mandate of RDA inter-alia includes providing expert advice to Government to make informed decision on:-
• Pricing of services commensurate with costs;
• Measures for enhancement of non-fare Revenue;
• Protection of consumer interests, by ensuring quality of service and cost optimization;
• Promoting competition, efficiency and economy;
• Creating positive environment for investment;
• Providing framework for non-discriminatory open access to the Dedicated Freight Corridor (DFC) infrastructure and others in future;
• Suggesting measures to absorb new technologies for achieving desired efficiency and performance standards;
• Suggesting measures for human resource development to achieve any of its stated objectives, etc.

Some Recommendations of the Bibek Debroy Committee

• Transition to commercial accounting: The process of accounting in Indian Railways is very complicated.
• The financial statements of Indian Railways need to be re-drawn, consistent with principles and norms nationally and internationally accepted.
• The non-core function of railways must be privatized: These activities include running hospitals and schools, catering, real estate development, including housing, construction and maintenance of infrastructure, manufacturing locomotives, coaches, wagons and their parts.
• Expansion of Indian Railways Manufacturing Company: According to Debroy, wagons are already produced by the private sector. Coaches and locomotives could follow. Unless they are freed from 59 their constraints, the existing production units will be unable to face this competition.
• Encouraging private entry: Private entry into running both freight and passenger trains in competition with Indian railways should be allowed and private participation.
• Independent regulator: Shift regulatory responsibility from the government to an independent regulator as the private sector will only come in if there is fair and open access to railway infrastructure.

Road Ahead

• Privatisation of railways operations will require a new institutional framework where infrastructure will remain as a government's monopoly while there would be a market of service providers.
• Core Railways functions can be Corporatizied rather than privatized.
• Corporatization refers to the restructuring or transformation of a state-owned asset or organization into a corporation. These organizations typically have a board of directors, management, and shareholders.
• However, unlike publicly traded companies, the government is the company's only shareholder, and the shares in the company are not publicly traded.
• It is important to modernize the railways, so measures must be taken to reimburse the social costs speedily so that resources of the railways are better allocated and facilities are upgraded from time to time.

Conclusion

• Private partners in Railways is something that we need to look forward. Even roadways and other sector has already have similar kind of arrangements and agreements in place and we are going very well. This type of model is going to help the passenger to get better experience and also enhance the quality of services. But the question is what kind of rules they are going to follow is still going to see.