Railways terminates Rs 30,000 cr private passenger train bid process; fresh tenders soon 

The Union Railway Ministry has decided to terminate the ongoing bidding process for private passenger trains after a tepid response from bidders owing to contract rules mostly favouring the Indian Railways.
 
A government source close to the development told BusinessToday.In, "The current tenders for private train operations will be discharged and fresh bids with changes in the provision for private participation will be rolled out soon."
 
"The ministry has started work on fresh bids with learnings from the recent tendering process," the source added.
 
In July last year, the Ministry of Railways had rolled out bids for private participation in passenger train operations in twelve clusters across the country. The plan included 109 origin - destination pairs. Winning bidders were to be provided a concession period of 35 years on a revenue basis model.
 
During the Request for Qualification (RFQ) last year, the private sector firms displayed a lot of enthusiasm with 16 firms showing interest in the project. GMR Highways Ltd, Indian Railway Catering and Tourism Corporation Ltd (IRCTC), IRB Infrastructure Developers Ltd, Cube Highways and Infrastructure III Pte. Ltd, and CAF India Private Ltd were some of the major firms that evinced interest in the project.

However, this number significantly reduced in the recently held RFP stage (financial bidding) with only two bidders coming forward. The bids were submitted by IRCTC and Megha Engineering and Infrastructure Ltd for two clusters, while all other bidders backed out, citing concession rules favouring Indian Railways. A Railway Ministry official told BusinessToday.In that the tender committee will decide on the further course of action on the bids received by the two companies, now that fresh bids are to be invited. 

Under the bids for the operation of private trains on the Indian Railways network, a concessionaire was liable to pay haulage charges as well as penalties on non-compliance with the performance indicators mentioned in the concession agreement.

Experts believe that COVID-19 too is responsible for the tepid response along with the contractual issues. Agreeing that the private operation could turn into a game changer, Kushal Kumar Singh, Partner at Deloitte, said that clubbing the project with Make In India may require a relook. “The Make in India clause and the condition to procure majority rolling stock for the project needs to be further deliberated. It gave significant bargaining power to the manufacturers in India. That is one area of concern,” Singh said.  

Infrastructure expert Manish Agarwal told BusinessToday.In that the bidders lost interest as the Indian Railways in a way stressed too much on protecting the downside along with other major concerns. “There were concerns about Railways as a competitor and Railways as a regulator. There is, no doubt, the need of a technical regulator. Even though the Railways kept emphasising on fair regulation, there has to be contractual commitment for a project to be financed,” Agarwal added.

Tariff competition with the Indian Railways is yet another major issue in the entire plan. “It will naturally be a matter of concern for the bidders. Unless the user experience, including the time taken is significantly different, passengers may not want to pay a higher fare,” said Jatin Aneja, partner, Shardul Amarchand Mangaldas adding that a scheme of such sort may run successfully in the short to medium distance.  
 
The passenger traffic on the Indian Railways has grown from 4.83 billion in 2000-01 to 8.08 billion in 2019-20. According to data from the Railway Ministry, there were 88.5 million waitlisted passengers in FY19. 

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