Railway privatisation round 1 goes off track amid operational hurdles

The first round of railways privatisation bids have been nixed by a mix of operational hurdles, a slump in passenger traffic due to Covid-19, and fear of competing with the Indian Railways itself. To add to these, fixed costs, that would keep building up seem to have blighted the private rail tenders.

Sector watchers said these trains were to compete with high-speed trains of the Indian Railways such as the Rajdhani Express on popular routes. While private players can try to match the service, speed, and efficiency, they will find it hard to match fares set by the Indian Railways for these services. The lack of an independent regulator to ensure that the Railways Ministry gives a level-playing field to private- and government-run trains was also a deterrent for the players.

Officially, the government maintains that the bids in the first round have not yet been scrapped and the evaluation is on. But the Railway Ministry is rethinking about the auctions and the low number of participants in the private rail bids.

Despite having about 15 interested players, IRCTC and Megha Engineering and Infrastructures (MEIL) were the only two to take part in the bids.

IRCTC’S woes with ‘corporate trains’

According to officials, IRCTC found it hard to find financing for private train operations it put up for bids. It held preliminary talks with fellow Public Sector Undertaking (PSU) Bharat Heavy Electricals (BHEL) to fund private train operations, which might have been the first financier to be approached by IRCTC since they had initially expressed interest in running private trains.

These talks did not materialise, and the IRCTC gave an open offer to anyone interested in helping them shore up monies to run private trains. But this didn’t progress much either and IRCTC informed the Rail Ministry about these failed attempts.

Things got complicated for IRCTC when it had to curtail operations of its three premium train services due to the pandemic.

IRCTC ran two Tejas Express trains and one Kashi Mahakal Express train. To make a distinction from other rail services, these trains have exclusive reservation counters at stations among other amenities. The offerings on IRCTC’S “corporate trains” come at a cost to the passengers. Because of the dynamic train fare, passengers shell out, an average 1.5 times, the fare to avail of these superior services.

While the two Tejas Express trains have resumed operations, officials told Business Standard that IRCTC had withdrawn from operating the Kashi Mahakal Express. “We have told the Rail Ministry that we do not want to operate the Kashi Mahakal Express anymore,” the official said.

A delay from the ministry in waiving fixed charges (fixed haulage and custody cost) worth ~27.93 crore for the non-operational period of IRCTC’S trains due to the pandemic seems to have soured the PSU’S experience.

Private sector’s apprehensions

Bids for private train operations coincided with Covid-19 lockdowns. IRCTC’S experience with private train operations was monitored by other players who felt they might end up getting a raw deal.

This is largely due to the lack of an independent regulator to ensure an equal footing to privately run trains and those run by the Indian Railways.

“The most important reform needed is an independent regulator that treats both operators objectively. There needs to be a clear line of difference in government as an operator and government as a regulator,” said Arindam Guha, partner, government & public services leader, Deloitte India.