Railways trusts competition; rules out fare regulator for private trains

The Railways has ruled out the possibility of a fare regulator for private trains and said that competitive tension prevalent in the Indian transport scenario should address the risk of prohibitive pricing.

A set of documents made public by the Railways said the project of bringing in 150 trains to be run by private operators does not have provisions for a fare regulator and stated that any form of economic regulation may have an impact on project revenues.

The PTO (private train operators) would be operating in a competitive environment and would need necessary autonomy. Indian transportation landscape is quite competitive and there is sufficient competitive tension in the market," the document, a structural, financial and operational feasibility study of the private train project said.

"PTO(s) are likely to compete with all modes of transport and not likely to operate in a monopolistic environment. Accordingly, though PTO(s) will have the autonomy to determine and levy fares, travellers would always have a choice for alternative trains / modes of transport. Such competitive tension should address such risk of prohibitive pricing by PTO(s), it said.

Railway board chairman VK Yadav had earlier stated that the ministry is considering setting up a regulatory authority in the future.

The feasibility study states that there is a possibility of a rail regulatory body being set up in the country to regulate various entities and their functions. It also advised the ministry to consider clarifying that the project would not be under oversight of the proposed regulator.

This would provide clarity/certainty to interested bidders. However, if MoR desires to have this project under the oversight of regulator in future, provisions to this effect should be included, it added.

The document has taken railway regulatory authorities in the UK and Australia as a model for designing its own structure for private trains -- in both these countries there are economic regulators but they do not control fare structure.

The Railways has clearly stated, even in response to queries from potential operators who attended pre-application meetings for the running of private trains, that it has no plans of capping fares.

When a question was raised if fares which will be determined by the private players need approval from any regulatory authority, the Railways answered in the negative, saying, The fare will be market-driven, no approval is contemplated.

The Railways has also maintained that train tariff is a significant part of the gross revenue of which the national transporter will have a share.

To manage demand, PTO(s) would need to differentiate themselves on service and pricing. PTO(s) are expected to have autonomy to determine the product offering, quality of service (with minimum KPIs to be complied) to generate demand. However, fare would be a key factor as well and PTO(s) would need to be able to dynamically respond to competition, the Railways said in the feasibility report.