FinMin for privatisation in rly passenger services

The finance ministry has recommended the entry of private players in passenger train services to instill competition, increase facilities and enhance the overall services performance of Indian Railways.

It has asked the railway ministry to prepare a roadmap to introduce private competition in the railway passenger transportation system. Such a recommendation was also made in the Economic Survey of 2009-10 and the finance ministry’s reiteration of the suggestion in the fourth consultative meeting on Infrastructure Financing indicates the serious intent of the government.

Indian Railways have till now evolved as a vertically integrated system, in which the provision of both infrastructure and transportation services are provided largely by a single entity – the railway ministry. Private competition has been introduced in freight operation.

“The role of private players in railways needs to be enhanced. Cargo may be left with the public sector and passenger traffic may be allowed to be handled by the private sector,” said a background note on the meeting of the consultative committee on infrastructure Financing, held on October 27.

In freight operations, the private sector has been involved in areas of infrastructure creation and upgradation. Amongst these, the most prominent projects have been rail-port connectivity in some of the major ports and special container freight services (SCFS). Within SCFS, 15 companies have till date received licences to operate container freight services.

Moreover, the government is considering developing dedicated freight corridors under the public-private partnership (PPP) mode.

The finance ministry has noted a “limited” exercise in separating the two components of infrastructure and transportation services has taken place and it proposes the “exercise to unbundle” be continued and scaled up to “subsume passenger services” in due course.

Analysts, however, feel the process of introducing the PPP model in railways in both freight and passenger services is a challenging policy reform.

“Though there are areas in which the railways have introduced the private sector, as far as making PPP a success, railways have a long way to go. They will need a proper framework and have to face many challenges. They will have to take on board expectations and concerns of the private sector as well,” Vishwas Udgirkar, executive director and group head – infrastructure, PricewaterhouseCoopers, told Business Standard.