Railways may scrap first private train operations tender over viability

Rethink driven by poor response to the initiative, with only two bidders

The Indian Railways may end up cancelling the first round of bids they had called for private train operations. According to officials in the know, there is a rethink going on in the Railway Ministry about the viability of these operations after getting just two bidders for the ambitious private train programme.

“The evaluation of these bids is on. As of now, the process is still on,” a Railway Ministry spokesperson told Business Standard.

In July 2020, the Rail Ministry had invited Request for Qualifications for private participation for operation of passenger train services over 109 Origin Destination pairs of routes through introduction of 151 modern trains. It was estimated that the project would entail private sector investment of about Rs 30,000 crore. This was the first initiative of private investment for running Passenger Trains over Indian Railways network.

Later in October 2020, the Rail Ministry said that 120 applications have been received for the 12 clusters, from 15 applicant firms. In November 2020, out of 120 applications, 102 applications are found eligible to participate in the Request For Proposal (RFP) stage. It was targeted to award all the clusters by February 2021.

Among the participants were Megha Engineering and Infrastructures (MEIL), Sainath sales and Services, IRB Infrastructure Developers, Indian Railway Catering and Tourism Corporation (IRCTC), GMR Highways, Welspun Enterprises, Gateway Rail freight, and Cube Highways and Infrastructure III.

Malempati Power, L&T Infrastructure Development Projects, RK Associates and Hoteliers, Construcciones y Auxiliar de Ferrocarrriles, PNC Infratech, Arvind Aviation, and BHEL had also qualified to this stage.

But when actual bids were opened, in July 2021, IRCTC and MEIL were the only two who actually put in bids. This reflected poorly on the prospects of running these trains.

To fund these opertions, IRCTC was also on the look out for a partner to foot the bill of recurring costs that come with private train operations.

According to officials in the know, the talk of scraping these bids and coming out with a fresh tender for private train participation has been gaining steam for the past week. The new bids will include more relaxed revenue share commitments and even waiver of some fixed charges to attract bidders.

"The current bids for private trains were not financiable; the bidders needed three major changes. One, a technical regulator, to ensure that track access is on a non-discriminatory basis. Two, assurance that premier trains operated by railways would not be able to offer subsidised price. Three, low to nil haulage charge, to make the demand risk more manageable," Manish Agarwal, Infrastructure specialist and Co Founder of AskHowIndia.org told Business Standard.

"Financing demand risk would be difficult in any case. Any uncertainty on Indian Railways as counter party would only add to the difficulty," Agarwal added.