Private players in Railways

Kashmir Times. Dated: 7/5/2020 11:49:28 PM

Opening up Railways for private players at a time when India is battling the Coronavirus is a bad idea

The NDA-government appears to be in a hurry to allow private players in the Indian Railways on 109 origin destination routes through 151 new trains in the next few months. This is a bad idea at a time when the entire country is battling the Coronavirus pandemic and Indian Railways which is the only form of transport that remain a government monopoly and provides commuting facilities to a large number of passengers belonging to the poorer sections of the society. On Wednesday last week, the Indian Railways initiated the process of allowing gthe private forms to operate passenger trains on its network by inviting them to participate in the bidding. In return, private players will have to pay fixed haulage charges, energy charges on the basis of actual consumption and a share of their gross revenue to the Railways, the last parameter subject to bidding. Despite the fact that the Railways have taken some steps to make this an attractive proposition for the private sector, there are still doubts about the participation of some major players. Some of the private players may not be very eager to participate for the reason that the time slots for private operations have been fixed at the bidding stage itself. Along with this proposition, there are several critical issues that remain unaddressed at this stage. Firstly, there are questions over the financial viability of some routes. This is mainly for the reason that the Railways tend to cross-subsidise passenger fares through freight revenue. This translates to below cost pricing, which makes it difficult for the private players to compete. On the other side, higher fares needed to cover costs might bring them in direct competition with airlines, pricing them out of the market. Moreover, as the experience of private operators in running container trains suggests, setting up an independent regulator will be critical for creating a level playing field for private players. Currently, the same entity is effectively the policy maker, regulator and service provider, rolled into one. This, as the Bibek Debroy committee pointed out, “is a clear conflict of interest”. An independent regulator can help establish trust with the private sector, facilitating its entry, but without it, the balance of power will continue to be tilted in favour of the Railways.
Apart from what the political masters have in mind while taking a decision on liberalizing the entry of new operators may be a path for improving services and facilitating growth in this sector, there is need to exercise caution. In view of the inherent complexity involved in this, the Rakesh Mohan committee report had pointed out that the international experience on privatising railways showed that it was ‘exceedingly difficult and controversial’, and keeping in mind the social welfare concerns, this should be treated as an opportunity to explore what will work, while keeping the flexibility to adjust the framework and fine-tune the rules and regulations. It will not be out of place to mention that previous experience even in the Build Own Operate and Transfer (BOOT) model not many private entities came forward for participation or making attempts to build such an infra-structure, when government policies remain uncertain. Moreover, the policies formulated in handing over some of the operations of the government-owned facilities have not found favour with experienced forms or companies because they remained tilted in favour of the government or certain entities from the private sector. The case of allowing private companies operate about half a dozen airports in the country is an example when the entire policy was formulated keeping in mind only one or two private players. The same was the case of some private airlines, which were running in the red after some subsidies were withdrawn by the government. This became a case of crony-capitalism because these entities were surviving on doles from the government and not in a competitive market. Precautions need to be taken beforehand when Indian Railways is also opened for private players.



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