Privatization of Indian Railways | Indian Railways

Context:

• The Indian Railways is planning to procure readymade trains, train sets, coaches, and electric multiple units from private manufacturers.
• Tejas Express train which runs through the Delhi-Lucknow route is likely to become the first train that is to be operated by private entities.

Background

• Several attempts have been made in the past to involve the private sector in various arenas like wagon procurement & leasing, catering services, container operations and freight trains, warehousing and terminals facilities, and other rail infrastructure through various schemes framed by the railway ministry.
• The problems like lack of incentives for the investors and operational or procedural issues, policy uncertainty, absence of a regulator to create a level playing field, etc have significantly restricted the private sector participation.
• Through major factories like Chennai-based Integral Coach Factory (ICF), which is owned by the government, the Indian Railways would procure 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).

Need for the Privatisation of Railways

• Low Quality of Service, Punctuality, and Catering: Indian Railways has earned the credit for serving the largest democracy in the world, yet it faces criticism, especially in the case of aspects like service, punctuality, and catering.
• Low Internal Revenue: The problem of the cross-subsidization has badly affected the internal revenue generation of the Indian Railways.
  • Cross subsidization: The revenue that is earned through the freight traffic is diverted to meet the shortage in the passenger revenue, and therefore the expansion of the freight traffic infrastructure suffers.
• Increasing the Number of Accidents: Frequent railway accidents have raised questions on the government ownership of railways. Therefore, from a long time privatization of railways has been predicted as a possible solution to these issues.

Advantages of Privatization of Railways

• Improved Infrastructure: Privatisation of the railways would lead to better infrastructure and this would result in improved amenities for the passengers.
  • Currently, Indian Railways is marred by mismanagement in the form of stinking washrooms, dirty platforms, and lack of water supply. It is expected that by the privatization of the railways the private company will ensure better amenities.
• Normalization of prices due to the competition: Improvement in quality of services has to be matched up by a rise in charges paid by the travelers.
  • However, the issue of price rise will be solved when private players can enter the sector and this move would foster competition and hence would lead to overall betterment in the quality of services.
• Improved Security: Private participation can lead to better accountability and monitoring, and can keep a check on the rising number of accidents in railways.
• Better Technological Innovation: Private participation can lead to the infusion of modern technology and capacity building of Indian railways.

Disadvantages of Privatisation of Indian Railways

• Limited Coverage: An advantage of Indian Railways being government-owned is that it provides nation-wide connectivity irrespective of profit.
  • Privatization of the Indian railways would indicate the railways will become a profit-making enterprise, and this move by the government would lead to the elimination of those less popular railways routes.
  • Thus, the privatization of railways can have a negative impact on connectivity and further increase the rural-urban divide.
• Lesser Inclusive: Hike in fares can render the railways out of reach for lower-income groups.
• Issue of Accountability: The privatization of Indian Railways is not easy, as it covers every part of India and runs for 24×7 hours.
  • The whole railway system cannot be handled by a single party or coordination as it will be very difficult to manage if area wise management is given to the private parties.
• Impact on the Economy: Indian Railways is the backbone of India, it provides low fare transportation to agricultural and industrial trade.
  • Therefore, the privatization of Indian railways shall affect the Indian economy at large.
• It is difficult to privatize a portion of the railways’ operations as it is strongly vertically integrated.
  • Vertical integration of railways means ownership and maintenance of the rail and the associated infrastructure would all be vested under the Ministry of Railways.

Way Forward:

• In order to sustain the growth, efficiency, and modernization, the Indian Railways must reformulate its role and responsibility and must also completely reposition its operating role from a direct service provider to a supervisor of services. There is only one flip side to the privatization of railways in India – and probably the most important one i.e., subsidized fares.
• In order to keep the Indian Railways affordable for the lower sections of the society (post-privatization), the government must offer tax incentives and subsidies to those companies that would provide low-cost services, just like the low-cost airlines, to these very pocket of population.
• This in the long run would not only make Indian Railways the largest but also the most efficient railway network in the world through materializing the very purpose and essence of Indian Railways — ‘Lifeline to the Nation’.