Tuesday, December 6, 2022
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Fast trains, slow privatisation: How Modi govt should roll back state ownership of railways

50 private stations and 150 trains should help the govt learn, and frame sensible rules that are neither unfair to operators nor attract scandal.

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The issues to do with privatising railway services are not matters of principle, but practical questions to make the exercise a success. Many countries have privatised parts or all of their railway operations: The UK, Japan, Canada, Sweden, Australia, New Zealand, and so on. Egypt has started the process, while Argentina has moved much further down the road (or rail track). Many of these countries had begun a century or more ago with private railways, nationalised them when railway companies ran into trouble, and are now rolling back state ownership and/or operations.

India too began with private railway companies in the middle of the 19th century, nationalised them in 1951, and is now taking the first tentative steps in the opposite direction. Habibganj, the first private railway station (outside Bhopal), will soon be joined by 50 others; the initial plan was for 400. The two “private” Tejas trains (private in name only, because they are run by a state-owned company) will grow to 150 — hardly a big deal when there are 7,000 passenger trains being operated daily. Besides, the private dominance of most other forms of transport is already a fact of life: Ports and shipping, airports and airlines, toll roads, and passenger bus and trucking services. Only the railways remains a government monopoly.

So the issue is not an ideological one, of state or private ownership, but the fact that the privatisation of rail operations is far more complicated than with other forms of transport. Indeed, private railways has a chequered history. The construction and operations of the Indian railways in the mid-19th century were done by private companies with capital that was given a guaranteed return of 5 per cent. The scandalous history of how this turned out (the Indian taxpayer ended up paying Britain up to 4 per cent of GDP every year, much of it on account of the railways) was forgotten when the first private power generation companies were also offered guaranteed returns late in the 20th century.

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When the first coast-to-coast railway line was laid in the United States in the latter half of the 19th century, among the incentives offered was free land that was bigger in acreage than entire states. The more contemporary privatisation of British rail, Thatcher style, has also been endlessly controversial, but Japan operates more than half a dozen private railway systems with overlapping operations on common rail networks. India had little success when it launched private container freight operations a few years ago. And, a proposal in the 1990s to privatise railway workshops was short-lived.

The risks and problems are obvious. With the railways operating in competition with new private trains, the obvious conflict of interest could lead to disputes — but there is no regulator proposed for settling them. There is serious lack of carrying capacity on the trunk routes, on which many of the proposed private trains are supposed to run. And viability is an obvious question when the railways routinely cross-subsidises passenger traffic with the revenue from freight operations, and when air fares can often be surprisingly cheap.

On top of all this, the mutual dependence between the existing railways and new private train operators will work smoothly only if the charges for services provided are manifestly fair. In the case of airports, some airlines have complained of excessive airport charges, once asserting that these are among the highest in the world. One hesitates once again to suggest the need for a sector regulator, given the unsatisfactory experience with such regulators in other sectors (telecom, aviation, etc). But there is no alternative.

Given these unresolved issues and complexities, it is just as well that the government is hastening slowly, one step at a time. The experience with 50 stations and 150 trains should be a learning experience, helping those in charge to frame sensible rules that are not unfair to the new operators but without attracting charges of crony capitalism, criticism by the government’s auditor, and thereby potential scandal and court battles. The new trains should be fast, but the roll-out of the privatisation plan should be slow and well-considered.

By Special Arrangement with Business Standard

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  1. The word privatisation being used by the government is a deceptive generalisation. Ultimately, all these targeted government assets like, the ports, airports, petroleum companies, trains, stations et all, will land up (some already) in the pocket of one individual, Mr. Adani.

  2. For 9 March:

    Del-Bho by air. Best price Rs. 1898. Time taken about 1 hour.

    Del-Bhopal Shatabdi Express. Rs 1380 in Cc and Rs. 2415 in Executive Class. Time taken: 8 hours. More than 400 seats available.

    How can IR survive? For that matter how can the airlines survive? I have seen air fares as low as Rs. 1300 for Bho-Del.

  3. A small correcton habibganj is bhopal and not outside its tha secand staition of bhpal

  4. To make the railways a profitable venture there have to be double tracks on all routes to make commuting faster. The present single lines and train crossing causes unnecessary delays and in today’s world when time is money people prefer to use alternate forms of transport like air and road. So the railways should stop beautifying stations and concentrate on double lines to increase number of superfast trains and attract more private players

    • Getting land for doubling the track is a big problem. You can increase the capacity by simply running faster trains. That is the best way.

      But then the tracks and other maintenance infrastructure have to be upgraded. Indian Railways doesn’t have the technology for it.

  5. Till Indian Railways doesn’t speed up its trains, private or public, the trains will not make profits. And to speed up trains, they need either to buy or to develop new technologies for track inspection.

    • If the Government wants to Privatize these Properties of the Public and Government for the sake of giving good performance, then why should the Government exist at all & what’s their work? Shame…. On you…… U want to create a New Private India…???

      • Private or public, the railways cannot make profits or even recover costs.

        You cannot run an organization like this.

      • The primary task of a government is to ensure law, order and justice. This followed by ensuring universal healthcare and education. Finally creating a good environment where every citizen can develop and fully contribute to nation building. Governments do not create wealth, they only extract it from hard working people. When a government is unable to perform even it’s primary functions, it had no business running hotels, airlines, mining, bicycle and soap manufacturing, telecom, transport etc. This is the job of the people and the government only needs to provide a good regulatory regime. All public sector units including railways must be owned by it’s true owners, the tax payers, in the form of shares etc. Right now PSUs are nothing more then s parking lot for corrupt politicians and Public sector banks have become a channel to funnel tax payers money to crony capitalists. This with the full compliance of the government and government employees. If any non-governmental business organisation does this it will shut down like Yes Bank.

        • The problem under discussion is a bit different: private or public, Indian Railways are completely out of sync with the modern world.

          I agree with you that the government has no business running a business. But even here one has to go case by case. If the government can run a good business, why not?

          When the Rajdhani Express was introduced on 3 March 1969, the time taken from Delhi to Howrah was 17 hours. On March 3 2020 the time taken: 17 hours!

          So basically Indian Railways have been sleeping for the last 2020-1969=51 years.

          This has a rippling effect in the economy. You have a lot of people just sitting in trains eating mumphali (peanuts). This is not the way to run a modern economy.

          So why not give a simple target for IR: increase the speed of ALL trains by 20% in the next 2 years? The gain will be tremendous. And it is achievable.

          Privatization is a red-herring. I wish Ninan had pointed this out. But then he writes only about the economy.

        • Best comment. You defined Govt role like it is. Railways should be private. Only then can quality improve.

      • In India Private Train will be best as maximum Rail officers are corrupt. Maximum Rail Employees are Kamchor Lazy & only demand more salary but Performance is worst

  6. A good thought provoking article. Let it be slow, but to learn from each step so that every stake holder is benefited reasonably

    • Then what about people of India, even now most of the people from rural northern part of our country traveling in passenger train without taking ticket, and other occupies reserved compartments without valid authority , so for Railway not ready to take any action against this atrocity happend daily and causing inconvenience to the bonafide passengers .Railway as Gould have control over fixing of fare and not allow to fix the fare by private operators,so that public will not suffer.

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