A peek into the Indian Railways' blueprint to roll out private trains
Concepts like waiting list might soon become history if Indian Railways' plans are implemented.
People might soon have the option to travel on a swanky private train instead of waiting for the one operated by the government transport behemoth to arrive at the platform. The concept of waiting list for tickets might also become history in at least some routes as there would be more trains, if the IR’s plans are implemented.
In New Delhi’s Rail Bhawan, the IR is getting ready with a set of bidding documents to invite private train operators — including global players — to run trains and fix their own fares in 150 routes. The blueprint, seen by ET Magazine, sets the deadline of late 2020 for awarding the contracts so that the new train-sets can hit the tracks by 2023-24.
Private companies already operate and run container trains in India. But passenger operations have been the preserve of the IR. The plan to allowing private players in passenger operations won’t be a piecemeal exercise, going by the IR’s plans. Private operators might even be allowed to bring in their own loco-drivers, though with a caveat that the drivers will have to be certified by the IR for security and safety reasons.
“The railways will have 150 private trains, to begin with,” says Railway Board Chairman Vinod Kumar Yadav in an exclusive interview with ET Magazine on the introduction of private trains. “We will run those in Delhi-Mumbai and Delhi-Howrah corridors and also in other viable stretches. There will be a regulator to decide on disputes on routes, fares et al.”
The operators will be allowed to either import coaches and locomotives or to get those on lease from the IR, he adds.
ET Magazine also spoke with two other senior officers connected with the development to understand the nitty-gritty of the groundbreaking initiative of the transport behemoth — the fourth largest in terms of network (68,000 route-km) after the US, China and Russia. The IR, the officials say, will take a haulage charge from the private operators for using its platforms, tracks, signalling and other infrastructure. Electricity charge will be calculated separately so as to give incentives to operators who bring in new-age trains that consume less power.
There is no clarity as yet on which global railway operators are showing interests in running train in India. The IR hasn’t publicly spelt out the conditions for the private entry. But a back-of-the-envelope calculation shows the initiative may straightway fetch the IR Rs 16,000 crore in private investments. If, as Yadav says, 150 private trains are introduced and each has 16 coaches, it would make 2,400 coaches in total. Assuming each coach costs Rs 6.5-7 crore, according to industry estimate, the IR should be able to attract Rs 15,600-16,800 crore in private investments.
The IR’s latest train — Vande Bharat, or Train 18 as it was earlier called — has 16 coaches. It was manufactured at the Integral Coach Factory (ICF) under the Make in India banner and was inaugurated on February 15. The semi-high speed train can reach 160 km an hour, had automatic sliding doors and other latest technologies that set it apart. Though it received wide publicity, the train faced criticism for consuming more electricity. It also sparked differences between the Indian Railways’ electrical and mechanical wings over issues related to weight and other specifications.
The private trains will most likely be run by a consortium of train operators, rolling-stock suppliers and investors, says Harsh Dhingra, a management consultant who had earlier served as chief country representative of Bombardier in India. Else it might be difficult to get the technical, operational and financial expertise together for a successful operation. “A supplier like Bombardier can at best be a part of a special purpose vehicle, but the lead has to be taken by a train operator,” Dhingra adds.
Deutsche Bahn AG (Germany), SNCF (France), MTR (Singapore), Virgin Trains (UK), First (UK) and Renfe (Spain) are among the famous train operators across the world.
The IR is likely to allow public sector train companies, like SNCF, to take part in the bidding.
The government had on its part, as was articulated by Railway Minister Piyush Goyal in the Lok Sabha last month, said it would place private trains under the larger bracket of public-private partnership. After all, tracks, signalling, stations and other infrastructure will continue to be with the IR. And the government won’t give away its existing trains to private players.
Dhingra also anticipates Indian companies directly or indirectly connected to railway networks — for example, Tata, Adani and Larson and Tubro — may join the bandwagon. The India managing director of Talgo, Spain-based high-speed passenger train maker, Subrat Nath says he has been receiving enquiries from Indian companies on a possible tie-up. “Our company is bullish on India. If the Indian Railways offers buzzing routes for private operators, why not? We would like to be part of a consortium and bid for it. We feel the early birds will have profitable businesses.” He adds that Talgo India has the potential to grow bigger than its parent company, Talgo Spain.
The IR has tested Talgo trains on its tracks, but the Spanish train manufacturer is yet to make any business from India. For private operators, the key to profit will be through routes and time slots. They will have to get routes that have heavy passenger traffic but ensure there are no delays, for quick turnaround of trains.
As it stands today, the IR may bid out several routes and time slots in the Delhi-Mumbai and Delhi-Kolkata corridors for private players, apart from handpicking other viable routes such as Bengaluru-Chennai, Bengaluru-Mysuru, Secunderabad-Vizag, Nagpur-Secunderabad and Howrah-Vizag, according to officials in the know.
The selection of routes won’t be random. IR has estimated that both the eastern and western dedicated freight corridors (DFCs) — connecting mainly Delhi and Kolkata and Delhi and Mumbai — would be ready by December 2021. That means, 90% of the freight traffic on the existing corridors, which carry passengers and freight, will shift to the DFCs, where 120 trains will run daily at 70-80 km per hour, up from 40 now. Also, in the next four years, the Delhi-Mumbai and Delhi-Kolkata passenger corridors will be upgraded for trains to run at 160 kmph, from 130 now. The cabinet has given approval to upgrade the tracks. So, by 2023-24, the IR will need a large number of semi-high-speed trains to fill up the void in the passenger corridor.
The private operators are expected to play a role here. An IR official says busy routes other those in the Delhi-Mumbai and Delhi-Kolkata corridors too need to be put out for bidding to woo big train operators. After all, bigger players will enter into the Indian railway market only if they see volumes. The initiative makes sound financial logic for the IR, as private trains will not erode money from its exchequer.
There is no doubt that the IR’s financial health continues to be a concern. Its earnings have not improved. Besides, 63% of its expenditure is now incurred on account of salary and other allowances (40%) and pension (23%), according to the budget estimate of 2019-20. Fuel accounts for 15%.
No wonder, the operating ratio of the IR was 96.2% in 2018-19, which is marginally better than 98.4% in 2017-18. That means, the IR uses more than Rs 96 of every Rs 100 it earns for its day-to-day expenses. This leaves aside virtually nothing to re-invest.
Given this situation, there is an argument that it would make sense for the IR to get private players instead of going ahead with its plan to replace 43,000 outdated ICF coaches with Linke Hofmann Busch (LHB) ones. Not only will the IR struggle to find the money for this replacement, but LHB coaches are an outdated technology globally, say experts. Private trains, on the other hand, will bring in newer coaches and the latest technologies. At present, LHB coaches are used in trains such as Rajdhani and Shatabdi.
The introduction of private passenger trains, however, is not going to be easy considering the potential opposition from railway trade unions and political parties. Though the IR has for the last 13 years allowed private players to operate container trains on its tracks, the very words “privatisation” and “private train” sit uneasily among a section of the railway fraternity. The first hurdle for the IR would be to convince its own workers and trade unions that getting private trains won’t rob them of their jobs. The IR has a staff strength of a little over 1.2 million against the sanctioned strength of 1.5 million. The fear among the workers is that the entry of private train operators will curtail their strength even further.
“We will oppose any move to privatise the railways,” says Shiva Gopal Mishra, general secretary of All India Railwaymen’s Federation. “Why should we get trains from private operators when we have quality trains such as Shatabdi and Vande Bharat? Had trade unions not been there, the railways would have long been a loss-making entity, just like Air India.”
The trade unions are also threatening nation-wide protests. The move to invite private operators, once it is announced, may witness massive political opposition as well.
Interestingly, the IR was during the major part of the British Raj developed and operated by private companies such as East Indian Railway Company, Great Indian Peninsula Railway and the Bombay, Baroda and Central India Railway, among others. But it has been under the Government of India’s control since 1924. After 1947, there was no attempt to bring in private passenger trains, though foreign companies with Indian partners were allowed to run civilian airlines.
So what will be the impact of private trains? Statistically speaking, the introduction of 150 private trains is unlikely to upset the functioning of the humongous Indian railway apparatus that operates 13,542 passenger trains a day and carries 23 million passengers. Private trains will account for just 1.1% of passenger trains a day. Yet, the deployment of 150 technically superior and faster train-sets will give the IR a facelift. Punctuality is also likely to see a major improvement.
After all, if one Vande Bharat Express had caught the imagination of the entire nation, imagine what 150 stylish ones will do.
5 Questions on Private Trains
Vivek Sahai, a former Railway Board chairman, has posed these queries to Indian Railways on its plans to start private trains:
1. IRCTC was created for better catering services. Has it been selected to operate trains because it has achieved that objective?
2. If private trains are introduced, who will control the fare? Also, why has railways not been able to raise passenger fares?
3. Will profitable routes be given to private operators?
4. Why is railways only planning 160-kmph trains? Why not 200-kmph trains?
5. Private trains may be a success in Japan, but what is the guarantee the same model will work in India? Has our purchasing power reached a level it can sustain trains with better amenities but also higher fares?