Without an independent regulator, the Railways has too much discretion and that will frighten away investors.
Railway minister Piyush Goyal has done well to further the cause of reforms in his ministry by throwing open 109 routes to the private sector. Indeed, while Goyal has been talking of private trains for some time, the three non-Railway trains are those run by the IRCTC which is its subsidiary. Under the proposed scheme, private sector bidders are free to choose what trains and coaches they want and can also fix their fares. In return, they will pay the Railways a flat fee per coach or train and a certain share of their revenues; the latter, in fact, will be the parameter that will be bid upon. The Railways is hoping to attract around Rs 30,000 crore of investment in this first round of allowing private sector players in and, more important, with this, it hopes to further improve the quality of train travel across the country; some of the modern railway stations being planned, in any case, look like airport terminals.
A lot more, however, needs to be done to be able to achieve the benefits the minister is looking for. As in the case of freight trains where private sector participation is already allowed, the Railways retains too many levers of power. An attempt has been made to remedy this by, for instance, fixing time slots at the bidding stage itself. If this had not been done, for instance, winners would be negotiating with the Railways for what time the train from Delhi to Kathgodam would leave, or come back; this has now been fixed at 09:05 hours for departure and 23:30 hours for the return journey. But, what if the private bidder wants to change the time, now or later? Surely there should be a provision for this?
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The entire route is not to be given, the Railways can run a train on the same route as long as there is a gap of at least one hour between its offering and that of the private firm. At an overall level, passenger subsidies are equal to the revenues the Railways earns from passenger services; it is obviously higher for some class of services. Theoretically, then, if the private firm charges Rs 1,500 for a ticket, the Railways can run a train an hour before or after this while charging Rs 750. The fear of predatory pricing is not unreal; in the 2000s, private oil marketing was allowed but, since the government never kept its promise of ending petrol/diesel subsidies, buyers stuck to PSU petrol pumps and both Reliance and Essar had to mothball their petrol pump networks. Indeed, this is the real fear, not the government capping the fares private firms can charge.
There is also the issue of damages when a train is late or, say, there is an accident since the decision on who is to blame will be taken by the Railways. And, what happens if traffic is lower than expected? Will the Railways automatically lower the revenues it charges; what happens if the Railways aren’t able to clear tracks in time and allow passage for the private train? All of these, and more, are issues that an independent regulator would have dealt with ideally. But, that remains stuck, and there is no clarity as to whether the regulator will have over-riding powers; indeed, till the prime minister’s office stepped in, the regulator was to be chosen by the Railways. Ideally, the plan to attract private players should have been embarked upon after a truly independent regulator was in place. Even now, the attempt should be to create this oversight mechanism at the earliest.