Private players train eyes on berth of a new era

Ajay Banerjee

Railways hopes it works out as in aviation sector
IRCTC stocks rise, even as unions call for protest on Oct 23

Ajay Banerjee in New Delhi

IN March 1994, Prime Minister Narasimha Rao’s Cabinet allowed private players to run scheduled airlines, altering the dynamics of the civil aviation sector. Ticket prices are now affordable, multiple options exist, while the number of flights between any destination has increased. The industry has seen much churning, including the present one with the government offloading its stakes in the continually loss-making Air India.

Twenty-five years later, the Narendra Modi government has taken the first step to gradually open up the Railways to private participation in the passenger segment. Private players have already been allowed in freight movement for more than a decade. Riding on the promise of privatisation of the passenger segment, the stock of the Indian Railway Catering and Travel Corporation (IRCTC) made a historic opening on the BSE Sensex on October 14. From its issue price of Rs 320, the stock zoomed to Rs 778 when the week closed on Friday, October 18. The government offloaded 12.5 per cent of its stake in IRCTC, a subsidiary of the Railways. The IRCTC’s main revenue is from the Rs 30 charge levied on booking e-tickets. With lakhs of e-tickets booked each day, profits run into crores of rupees.

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The grand plan

On June 26 this year, Railway Board chairman Vinod Kumar Yadav put out a four-page 11-point agenda which spoke about inviting private players to run overnight and some day trains on important routes. It also includes turning coach factories and other production units into corporate entities; an advanced signalling system which will enhance safety; improve punctuality by providing electronic information to the loco pilot which will come in handy during adverse weather conditions like fog; and increasing the speed of trains on key routes like Delhi-Mumbai and Delhi-Kolkata.

The Railways is hoping to introduce 150 privately run trains in phases over the next five years. These private operators would be expected to operate their own train rakes — which can be imported, or bought/leased from the Railways. Routes are being worked out and the bidding process would bring out details.

An empowered group of secretaries — government parlance for a high-level body — has been constituted for the privatisation of 150 trains and 50 stations. The Railway Board chairman and the CEO of NITI Aayog will be on the committee.

On July 17, Railway Minister Piyush Goyal told the Lok Sabha that “with a view to providing world class services, Railways is examining various options, including private participation in the operation of passenger-carrying trains”.

A month later, in August, two Tejas train rakes were handed over to the IRCTC on a trial basis for three years. The IRCTC gets advertising rights, freedom to decide its own fare and pay haulage charges to the Railways. This could be the template for future private operators.

Corporatisation of manufacturing units

The other big ticket development is the corporatisation of seven manufacturing units, including Chittaranjan Locomotive Works (CLW), Integral Coach Factory; Diesel Loco-Modernisation Works, Patiala; Rail Coach Factory, Kapurthala; Modern Coach Factory, Rae Bareli, and Wheel and Axle Plant, Bengaluru. The plan is to hive off these into a new entity called the Indian Railway Rolling Stock Company. A Cabinet note has been put out.

How it affects passengers

The move towards privatisation comes at time when prime routes of Delhi-Mumbai and Delhi-Kolkata are increasingly becoming popular for air travel. Fare of an AC First Class rail ticket on these sectors matches the airline economy fare. The fastest train on the route, the Rajdhani, does the Delhi-Mumbai (1,483 km) in 15.5 hours and the Delhi-Howrah (1,525 km) in 17 hours. A flight to either of the places is never more than 2:15 hours, making flights ‘a better option’.

One of the 11 agenda points announced by Yadav in June this year includes new infrastructure and trains running at 160 kmph to reach Mumbai in 10 hours and Kolkata in 12 hours. This will take some four years from approval and cost Rs 6,684 crore for the Kolkata route and Rs 6,804 crore for the Mumbai route. The two routes account for 30 per cent of railways passenger traffic and 20 per cent of freight traffic.

Dedicated freight corridors

The scheduled commissioning of the two dedicated freight corridors (DFCs) will set free a considerable track capacity on the existing Delhi- Kolkata and Delhi-Mumbai routes, allowing trains to run faster.

Two-decade-old story  

The Prakash Tandon Committee in 1995 gave its first suggestions on opening up the sector to private entities. After that, a series of committees like Rakesh Mohan Committee (2001), Sam Pitroda Committee (2011), and Bibek Debroy Committee (2014) were set up. Each gave separate suggestions which largely suggested the following: privatisation by dividing activities into ‘core’ and ‘non-core’; promoting PPP model; recommending complete corporatisation of the Railways and one even asking for the Railways to become just a track-owning company. A document called ‘Indian Railways Vision 2020’, released in 2009 during the tenure of Mamata Banerjee, said: “In the past, corporatisation within railways has yielded good results. Examples are Container Corporation, RITES, IRFC, IRCON International… We can further examine the possibility of widening the scope of such internal corporatisation of activities that can yield much higher results.”

Actually, till Independence, several states operated their own railways and even some private bodies ran services.

Options before unions

The Railways unions are powerful and are opposed to the very idea of private players entering the domain of railway operations. They fear a future like MTNL or BSNL in the telecom sector and Air India in the aviation sector. The private sector has captured the telecom market and two state-owned behemoths don’t have money to pay salaries. Air India is so far managing but with losses running into a few thousand crores, but is up for sale. 

The Railways has announced officially that “trade unions will be consulted”.

Shiva Gopal Mishra, general secretary of the All India Railwaymen’s Federation, has announced a nationwide protest on October 23 against the agenda of privatisation and has termed the move of starting the Tejas “ill-thought”.

SN Malik, press secretary of the National Federation of Indian Railwaymen (NIFR), says it has lodged a protest against the decisions. The Left-oriented Communist Ghadar Party of India is using its social media outreach and its publication Mazdoor Ekta Lehar, which is believed to be read by many rail workers. It has called upon all to oppose this agenda, “which is against the interests of both rail workers and passengers”.

The number of permanent workers has been brought down to 12.56 lakh while nearly six lakh contract workers are employed. The plan is to bring down the permanent workforce to 10 lakh, is what the Lehar has talked about.

Minister Piyush Goyal, in a reply to the Lok Sabha in July, said, “Tracks, signalling, stations and other infrastructure will continue to be with the Railways. And the government won’t give away its existing trains to private players.”

Within the Railways, there is an opinion that as long as their own trains are not withdrawn from the key routes to benefit private parties, there is unlikely to be any major resistance. The resistance will be more to changing the structure of production units like rail coach factories.

What will be handed over to private players 

• Once okayed,  private players will have the option to operate trains on select routes
• Some 150 train routes are being studied for phased introduction till 2024
• The infrastructure and signalling will be of the Railways, private players can either get a new rake from abroad or India 
• They can also lease one from the Railways. Private operators will pay haulage charges
• Fears abound that they will keep ticket costs and also operating costs lower than the Railways to attract passengers 

What will be corporatised 

• The proposal is to have a new entity ‘Indian Railway Rolling Stock Company’ — owned by the Railways — that will handle the existing production facilities to make coaches, locomotives, etc

What will remain with the Railways

• Besides the 150-odd private trains, the Railways will keep operating all other trains, including premier trains like Shatabdi, Rajdhani, Vande Bharat 
• Even on the routes where private trains will be permitted, the Railways will own the tracks, optic fibre network that runs along the trunk routes, signalling , electrical equipment, etc

Privatisation is out of the question

There is no question of privatisation of the Indian Railways. There is absolutely no proposal on the table and while we are in the government, there is no question of privatisation. That’s a complete no-no and a red line. The Railways is engaging with the private sector as part of a metamorphosis that it is going through, and it could team up with the private sector for initiatives like advertising and CSR. — Piyush Goyal, Railways minister

Started working on plan, will take time

The privatisation plan will take time. Many companies have shown interest. Offering trains to private players is important for Railways to sustain and grow. However, maintenance of train coaches, locomotives will be done by Railways, which will provide crew of loco pilots and guards. Private players will have remaining of services such as ticketing, entertainment and other services on board — VK Yadav, chairman, Railway board