Reforms in Indian Railways: Here’s why private trains are a win-win proposition

The Indian Railways (IR) have invited the private sector to own and operate passenger trains on over 300 paths, bundled into 12 clusters. It is estimated that each cluster would entail an investment of Rs 2,000-3,000 crore in procurement of rolling stock, and can cumulatively add significant capacity of AC coaches in the country.

There is some level of skepticism about the success of the move, given the railways’ patchy track record with the private sector, in private Container Train Operations and with the four models for PPP in railway lines.

Another criticism has been that allowing the private sector to operate trains that will service the highest end traveller segment, does not directly address the key challenges of the railways, namely of becoming operationally efficient and investing in expansion and upgradation of the network. But other than the anticipated benefit of attracting air and luxury-bus travellers to trains, there are three broader benefits that are possible from the proposal. Reaping these benefits would also require the Indian Railways to take initiatives that address investor concerns.

First, the private sector’s success would depend critically on IR’s operations of track and station access. The bidders will probably require very clear operating procedures, responsibility allocation and high penalties for non-performance by IR.