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Indian Railways privatisation explained – Burning Issues – Free PDF


  • To upgrade the country’s railway system, the NDA government has laid the roadmap for long-term partnerships with the private sector.
  • The government envisages around Rs 50 lakh crore of investment in rail projects up to 2030, but as per the Union Budget 2019 only a part of it can be financed through government coffers, and public-private partnerships are needed for faster development.

Why private players

  • It is estimated that almost 70 per cent of freight trains will shift to the two upcoming Dedicated Freight Corridors from December 2021. This will free up a lot capacity to introduce more passenger trains with better services and higher speeds.
  • Introducing new, modern trains requires heavy investment in rolling stock like coaches and engines. And then there is the cost of operations, which includes electricity, manpowe etc.

Why private players

  • As it is, running of passenger trains is a loss-making business for Indian Railways. It recovers only around 57 per cent of the cost through tickets on an average. The rest is cross-subsidised through earnings from its freight operations.
  • This 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.

How was the move rolled out?

  • Last year, an empowered group of secretaries headed by NITI Aayog CEO Amitabh Kant presided over this subject to expedite the process.
  • Railway Board’s Member (Engineering) and Member (Traffic) were co-opted in the committee as the two subjects are the domains of the two Board Members. The panel also looked into the redevelopment of railway stations through private participation.

How many trains will the private players operate and when?

  • The government has identified 109 busy routes across India to run 151 private trains for 35 years. These are routes with huge waiting lists and offer a potential to earn. The 151 trains represent only around 5 per cent of total trains run in India.
  • For the project, the routes are divided into 12 clusters based out of major city centres, such as Patna, Secundrabad, Bengaluru, Jaipur, Prayagraj, Howrah, Chennai, Chandigarh, and two each for Delhi and Mumbai.
    How many trains will the private players operate and when?
  • For the project, the routes are divided into 12 clusters based out of major city centres, such as Howrah, Patna, Delhi. (File) Each cluster is an independent business project, inviting a private player to manage.
  • The indicative project cost of the Delhi-2 cluster is Rs 2,329 crore. It has 12 origin-destination pairs as routes, and the average distance of the routes is around 925 km.

 Each cluster has an indicative project cost and average train distance of 900-1052km.

How many trains will the private players operate and when?

  • The bidding process will conclude by the end of this financial year. After that, the first set of 12 trains is estimated to roll out by 2022-23, thereafter 45 trains in 2023-2024, 50 in 2025-26, and finally the remainder 44 in 2026-27.

What kind of companies are expected to run the trains?

  • Any company with a minimum net worth of Rs 1165 crore in the last financial year can apply. This is different for different clusters depending on how much Railways estimates a cluster is worth.
  • But the range is between Rs 1,165 crore and Rs 1,600 crore. There is no bar on the number of clusters a company can bid for. Companies can also bid as consortiums.

What kind of service is expected from private trains?

  • The trains have to be technologically superior to what Indian Railways has. They have to run at a maximum speed of 160 kmph. They can be either trainsets (like the Vande Bharat) or hauled by locomotives.
  • They have to satisfy all safety preconditions on the Indian network. They have to be certified by bona fide certifying agencies. Each train will have a minimum of 16 coaches and the maximum length of trains permitted on any route. They will undergo trials in India before commercial rollout.
  • As for on-board services and tickets, the private operator has a free hand. It can decide the price of its services and what kind of add-on facilities it wants to provide. It has all the freedom to earn from fares as well as non-fare revenue. It will create its client base depending on its business model.

What will Indian Railways get from the private players?

  • In this business model, the private operator is supposed to share revenues with Railways. The qualifying company that agrees to share the maximum percentage of the yearly revenue with Railways will win the bid.
  • Besides, Railways will also get a standard haulage charge, akin to track access charge on a per-km basis. This charge is levied as the cost of using railway terminals, physical transportation of the train, track maintenance, signalling and overheads. The cost of the energy used by the trains will be paid in actual.

What will Indian Railways get from the private players?

  • Railways has also set certain key performance indicators for the private player, like punctuality, reliability, and maintenance of trains. In this, punctuality is the biggest parameter, carrying around 95 per cent weightage.
  • Lapse in maintaining the key performance indicators will invite a penalty, to be built into the haulage charges.

What will Railways give to the private players?

  • In return, Railways will be contractually bound to provide “non-discriminatory access” to private trains.
  • As part of the deal, it will give land to private players to set up maintenance facilities for the trains, and let them use washing lines to wash, clean and periodically inspect the trains in its facilities. After completion of 35 years, the maintenance facilities will belong to Railways.
  • The tickets to these trains will be booked through the current railway reservation system but the money will be kept in an escrow account.

Are private players new in the railway system?

  • Not in the freight business, where Indian Railways has been courting private players for a while now, through joint ventures and Special Purpose Vehicles etc.
  • The container cargo business has been opened up for private players to the extent that they can decide their own rolling stock and even develop their own business models.But the passenger train operations have always been a government monopoly.

Is this
privatisation of Indian Railways?

  • Both the Opposition as well as Railway unions have opposed this move, alleging it was the precursor to privatising the railway system.
  • Defending the move, Chairman Railway Board VK Yadav has called this a public-private partnership.

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