The private train mirage

No short-cut to reform in the Indian Railways

The possibility that Indian train travellers may soon be able to book a ticket on a privately-run train has seized the imagination of many observers of the sector. It has been reported that the Indian Railways is almost ready with its blueprint for public-private partnerships (PPPs) on rail travel, and may bid out routes as early as next year. This timeline is reasonable, given that the dedicated freight corridors (DFCs) are likely to come online in the next two years, freeing up a considerable amount of capacity on the existing mixed-use corridors between Delhi, Kolkata, and Mumbai. New tracks that are supposed to permit a top speed of 160 km an hour are also being planned for the next three to four years. The Railways apparently hopes that as many as 150 routes can be bid out to private operators, who will be able to bring in their own coaches and engines and also employ drivers as long as the latter have received some form of certification from the Railways. If all goes according to plan, and foreign investors such as the European public-sector rail majors are interested, then there will be a considerable inflow of resources to the Railways. 

While the motivation is understandable, the idea is fundamentally flawed. A multitude of questions could be asked, and most are weighty enough to sink the plan altogether. For example: Which routes and time slots will be made available to private operators? If it is only the most remunerative ones, then will the Railways’ resource mobilisation not suffer? Second, will the companies be given pricing power? An independent regulator has been promised, but there is also talk of fare caps. If the contracts are long-term — as they should be — then surely pricing power should be with private operators, otherwise they would face unacceptable levels of risk. The independent regulator will also apparently adjudicate disputes. But disputes in systems involving public and private players are endemic in India, and notoriously difficult to settle. In this case, the disputes might occur literally every minute, as trains compete for space and slots in stations or in crowded access networks. Who decides at each moment whether, say, an Indian Railways suburban train or a long-haul private operator gets priority at a congested signal outside a station? If it is the Railways, and it decides in favour of its own train, then can this decision be appealed — and what is the point of an appeal since the issue would need to be resolved in a matter of minutes, not years? Few investors are likely to be enthused by such a context.

At the very least, if private operators are to be considered, then the Indian Railways and the Railway Board itself would need to be reformed, and probably split. If the owner of the network also competes with private operators as a service provider, there is enormous scope for disputes, side deals, and corruption. Logically, the public sector trains and the public sector network will have to be detached from each other completely. But then, as is the case in Britain, it might result in chronic under-investment in the network. Appealing though private trains might sound, there are no shortcuts to a complete overhaul of the Railways itself, starting with demolishing the silos between departments and creation of a corporatised structure.