A different track

Context: Indian Railways opening up to private players in passenger services is a good idea – but there will be challenges ahead.

Steps taken by Government: 

• The Indian Railways (IR) has allowed private firms participation on 109 origin-destination routes through 151 trains.
• Private operators will have to pay fixed haulage charge, energy charges on the basis of consumption and share their gross revenues with the IR.

Challenges ahead:

• Questions over financial viability: 

• Cross subsidy in railways translates into below cost pricing, which will lead to an unfair competition for private players.
• High fares will put the private train operators in direct competition with airlines, pricing them out of the market.

• Lack of independent regulator: Crucial to provide a level playing field for private players.

• Conflict of interest: Currently the same entity is effectively the policy maker, regulator and service provider, leading to conflict of interest (Bibek Debroy Committee observation)

• Inherent complexity involved: International experience shows privatizing railways is “exceedingly difficult and controversial” –keeping in mind the social welfare concerns  (Rakesh Mohan Committee) 

Conclusion: Fine tuning of the rules and regulations should keep mind the above challenges and recommendation by various committees.