Sometime back, news items appeared in Swarajya , Live Mint among other media outlets over the proposed plan by the Indian Railways to allow private players to operate on select routes. While there are private freighters running for quite some years now, the passenger services seem to be the final frontier to be conquered by the private sector. The quasi-private sector IRCTC is already operating a couple of Tejas services. In fact there have been branch lines like Shankuntala Railway among others that have operated. Konkan Railway, Hassan-Mangalore Railway Development Company were essentially special vehicles designed to construct and operate railways in tough terrains. While the ownership remains in the hands of the corporation, the railways are involved in operational aspects. Moreover those too are quasi government organizations. Hence it becomes of interest to discern the likely trends in private participation in the Indian Railways.
Indian Railways is a monolith governed by the Railway Board which has witnessed some radical restructuring to streamline and integrate the functions across streams. Yet barring a link to the railways, there are wide divergences among the several zones, departments, divisions, units, factories, workshops among others. Motivations and priorities differ across each. The kind of expertize necessitated in smooth functioning and sustenance also differ. Hence there is an apparent need to bifurcate railways into several sub sets with differing competition structures at different layers.
Railway production is internally organised. There are coach factories like ICF which is engaged in production of railway coaches. There are Carriage and Works factory engage in production of carriages. There is Rail Coach Factory at Kapurthala. There is no need to keep them under Indian Railways. All the factories engaged in coach manufacturing as well as wagon manufacturing can be divested from Railways to create a Corporation which would later be listed in the markets or privatized outright. Therefore in terms of coaching and wagons, it would help build a competition albeit an oligopoly with options for exports.
Similarly the locomotive production units at Chittaranjan, Varanasi etc. should again be combined to form a rail loco manufacturing company to be privatized in a few years. The contours of locomotive production both diesel and electric would perhaps evolve as oligopoly with possibilities of competing in the global markets. Given their certain competencies developed, they might be prime candidates for acquisition by major players like ABB, GE etc.
Similarly there is a need to corporatize the network of workshop and maintenance units into a separate entity. These entities might not only serve their offering to the Indian Railways but expand the same to private players. In some ways, the carriage neutrality which is perhaps tilted towards the IR, might get balanced. These companies allowed to operate in the market model might have opportunity to build and consolidate sharp gains.
There must be a signal of caution at this stage that given the captive and protected environment they have operated in, there would be possibility of them falling by the side-line as and when major firms enter the Indian market. They perhaps are considered efficient relatively in the captive space they operate which might not necessarily translate into an open environment. Many firms operating in highly regulated space often face severe difficulties in adopting to new competition in unprotected open markets. The case study of BSNL is all too visible in this direction.
Railway stations are prime candidates for privatization under various models like BOT, BOOT, Swiss challenge etc. Stations in metro and tier -1 and tier 2 cities might attract attention, but the challenge would be bringing parties to operate in the stations of smaller towns and villages. The railways of course have the experience of operating halt stations at small villages this might be handy though a regular station perhaps need more than a mere selling of tickets in lieu of some commission. There would be further question of manpower requirements and management of manpower thus hired. Yet there is no doubt why railways cannot start with privatizing the stations. Many steps have been more of hype and less of substance.
This means Indian railways can concentrate on carriage (track and signalling infrastructure) where it has core competency. The content (train services, maintenance, stations, goods sheds) should become open to competition. The railways are expected to enhance the infrastructure through doubling and electrification of tracks, enhancing the signal systems through provisions for in-cab signalling etc. that would increase the throughput. The traffic density, low capacity, signalling infrastructure all are indicators currently of low average speeds at play. With the Dedicated Freight Corridors emerging and the anticipated extension of the same would see the freight traffic shift to those dedicated corridors.
In reference to operation of private trains, the railways seemed to be offering some select router around 100 or so in the initial plan. Yet for the train services, it is not merely the routes that is important but the timing of operation. For example overnighters can be very lucrative, yet if railways do not open up those time slots, the entire exercise of privatization might be unproductive. Hence there is a need for independent rail regulatory authority. The independent authority must have the power to auction the routes including the timings etc. that would provide equal playing field for Indian Railways and the emergent private service providers. Carriage neutrality is essential. The regulatory authority would be entrusted with regulating the prices, yet as the competition increases, prices might not be such an important factor. Secondly, operational considerations revolve around the priorities of the sectional controllers. They have a thankless job at hand yet their skewed priorities towards Indian Railways at the expense of private players might hamper the plans of smooth operations by private parties. There have been instances of complaints against railways of not giving priorities to private freight operations on grounds of heavy passenger traffic. It would be a good move for the railways to divest and create a new company for operating passenger services to build a level playing field.
Given the importance of railways, it is highly unlikely that these plans will have a smooth path. Resistance will be very high and perchance politically unattractive. There would be serious challenges at administrative, legislative and legal ranks. Piloting these passageways of ambiguity is irrefutably demanding. Yet there exists a times when one has to disassemble the status quo. In a recent event, PM Modi talked about this government’s steps in pulling apart the status quo. Railways is one area where is it is most required. If Modi government can do even some 20-30% of the process of privatization of world’s one of the largest manpower employers, it would be seen as bold, decisive and trendsetter.
Thoughts on Theory and Practice 