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How Indian Railways will function with private operators

The Indian Railways’ private train project which is currently underway will bring in 150 trains for private players to operate and is expected to see private investment of around Rs 30,000 crore. 109 pairs of routes have been formed into 12 clusters that will cover a majority of the railway network.

Around 23 global biggies, including Bombardier, Alstom, Siemens, NIIF, GMR and ISquared Capital, are in the race for Railways’ privatisation pie.

As an ancillary push for the Make in India initiative, the project aims to upgrade passenger experience to world-class standards with modern train rakes manufactured in the country. The first-of-its-kind venture is scheduled to begin operations by 2023.

Here we take a look at what all will change — fare, number of stations, etc — after the project is rolled out.

Competitive pricing
Indian Railways has said that there will not be a fare regulator for private trains and market competition in the transport system would address risks of prohibitive pricing, adding that economic regulations may have an impact on project revenues.

“PTOs (Private train operators) are likely to compete with all modes of transport and are not likely to operate in a monopolistic environment. Accordingly, though PTO(s) will have autonomy to determine and levy fares, travelers would always have a choice for alternative trains/modes of transport. Such competitive tension should address such risk of prohibitive pricing by PTO(s),” a study of the private train project read.

The study further states the possibility of a rail regulatory body being set up in the country. Railway board chairman VK Yadav had earlier stated that the ministry is still considering setting up a regulatory authority sometime in the future.

Even in response to queries from potential PTOs who attended the pre-application meetings, the Railways said that it has no plans of capping fees. It also maintained that the national transporter will have a share in train tariff which is a large part of the gross revenue.

Freedom in choosing halt stations
PTOs will have the freedom to choose halt stations for the trains they operate, documents released by the Railways show. Private operators will have to submit a list of the intermediate stations on their trains’ path and the time in and time out at these stations in advance to the national transporter. This will form a train operation plan which will be in effect for at least a year, after which it can be revised according to a draft of the Concession Agreement.

The number of halts by the PTOs will be limited to the number of existing halts by the fastest train of the Railways operating in that route. The operation plan will further include the stations at which the water tanks will be filled, among other such information.

“The Concessionaire shall have the flexibility in deciding the stops/ halts in accordance with the terms and conditions of the Concession Agreement,” the Railways said.

Freedom to lease/purchase rolling stock
PTOs will be given the freedom to procure trains — whether they want to purchase or lease — according to the railway ministry. This would encourage companies without a rolling stock manufacturing capacity to participate in the tender without any obligation to own rakes.

Not a free run
Due to the revenue-sharing arrangement of the private train project with the central government, representatives of the national transporter will be deputed in PTOs’ offices.

PTOs will have to pay heavy damages to the Railways if trains are late or even early. According to an IE report, PTOs will have to guarantee at least 95 per cent punctuality each year to avoid financial penalties. For every 1 per cent short of 95 per cent the PTO is, extra haulage charge worth 200 km will be levied.

Further, if revenue is more than 1 per cent of reported revenue, the PTOs will have to pay 10 times the difference as damages to the Railways.

 

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