Railways is going private, slowly but surely

Facing mounting losses in the passenger business, Indian Railways is moving ahead slowly but steadily towards privatization by offloading many of its services into private hands. In time, most major functions, barring the core operation of running the trains, will be managed by the private sector.

The Railways made a beginning by allotting two popular routes – New Delhi-Lucknow and Mumbai-Ahmedabad -- for private operations. For now, the IRCTC, a railways subsidiary, has been given the job.

While Railways maintains that the trains will be operated in PPP model, it is no doubt a harbinger of private entry into the passenger train business as there would be as many as 20 routes connecting all metro cities to be privately managed, according to the plan.

So far, IRCTC had been allowed to run only luxury trains for tourists, like the Maharaja Express or the Buddhist and Ramayan Specials. But for the Delhi-Lucknow and Mumbai-Ahmedabad sectors, IRCTC, which will run the Tejas Express, will not only decide the passenger fares but also have private Train Ticket Examiners, exclusive catering, separate lounges and staff to manage the service. Except for the train driver, guard, signalling and, of course, the track, all other functions will be privately managed. Until now, the passenger fare has always been Railways’ decision.

With private siding, port connectivity and ‘own your wagon’ schemes among others, Railways’ freight operations are already open to private players. These schemes allow private parties to lay rails connecting ports to export their products with their own dedicated wagons. Private sidings also allow businesses to invest in building siding for their freight operations.

However, the passenger business had been only partially opened -- for tourism purpose -- in a limited exercise so far. Now, with the opening of the two routes, the flood gates seem set to be opened further for private stakeholders to run passenger trains all over the country.

Delhi-Kolkata, Delhi-Mumbai, Delhi-Chennai, Chennai-Bengaluru, Mumbai-Shirdi, Howrah-Digha, Delhi-Patna and many such high demand routes will be gradually offered to private players, as per the plan.

While the manufacture of wagons is mostly in private hands, now passenger coaches are also to be produced privately for Railways, despite the national transporter having its own factories. The Vande Bharat Express, which was successfully made at Integral Coach Factory, Chennai, is now on offer for private manufacturers to set up shop and build it.

Notwithstanding the strong opposition from railway unions across the country, Railways has launched a mega plan to corporatise its production units. According to the action plan, a detailed study is under way to corporatise all seven Production Units (PU), including the Chittaranjan Locomotive Works (CLW-West Bengal), Integral Coach Factory (ICF-Chennai), Diesel Locomotive Works (DLW-Banaras), Rail Coach Factory (RCF-Kapurthala), Modern Coach Factory (MCF-Rae Bareli) and its associated workshops. These are to be clubbed into a new entity called ‘Indian Railways Rolling Stock Company’ under the Ministry of Railways. Starting with the newly set-up MCF-Rae Bareli, all PUs are to be taken over by the new entity in a phased manner.

Catering and onboard housekeeping services are already outsourced to private players. Most importantly, though signalling and telecommunication system is still with the Railways, the maintenance of overhead equipment (OHE), crucial for hauling electric engines, is in private hands.

While the track is Railways’ baby, its maintenance has been outsourced. The sub-assembly of high-end equipment required for rolling stock is also now privately managed.

Moreover, rail factories are expanding without commensurate deployment of staff, thus causing a large number of vacancies at these units.

According to Railways sources, since the Bibek Debroy Committee had suggested corporatisation of Indian Railways and encouraging private sector participation, the ensuing action plan is only continuation of the implementation of those recommendations.

Besides, many railway PSUs are going for divestment to meet the Modi government’s Rs 1.05 lakh crore disinvestment target, declared by Finance Minister Nirmala Sitharaman in her maiden Budget. IRCON, RITES, RVNL, RailTel and IRFC are some of the railway PSUs set for disinvestment.

Railways insiders maintain that barring train operations and control, including safety and track, everything else will be in private hands eventually.

The Railways is also going full steam ahead to redevelop about 400 stations, with private participation. The plan envisages that stations will have shopping malls, office complexes, eateries, budget hotels and parking lots as part of the redevelopment programme.

While the developer will also provide improved amenities for passengers on platforms, Railways will have a share of the earnings from commercial exploitation.

Apart from real estate development at stations, all railway printing presses are also to be closed and handed over for commercial development. These age-old printing presses, situated at Howrah, Delhi and Chennai, are in the process of being outsourced.

The Modi government began by discontinuing the practice of a separate Railway Budget and merging it with the main Budget, and the freight business was opened to private players. Now, the passenger segment is also passing into private hands for all practical purposes, albeit gradually.