In the Budget FY20 presented in July last year, the PPP mode has been recommended for tracks, rlling stock manufacturing and delivery of passenger and freight services.
Wednesday’s decision of the Indian Railways to rope in private operators to run passenger trains under a revenue-share, long-lease (35 years) model marks a watershed moment in the history of the national transporter, analysts said. Railway board chairman V K Yadav said on Thursday that the bidding process for private operators to run 109 pairs of passenger -rain routes through 151 modern trains will be finalised by April next year, and the trains will start operations latest by April 2023.
While the plan falls short of privatisation — the many expert panels which laid out the road map for the much-delayed rapid expansion-cum-modernisation of India’s railway infrastructure also fought shy of the word ‘privatisation’ – the new move would likely herald a surge in the long-elusive private investments in Indian railways systems. It will also reduce the IR’s reliance on borrowed funds to meet its expansion requirements.
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The Railways has drawn up Rs 50-lakh-crore infrastructure investment plan for the ten years till 2030. But the transporter’s tryst with public-private partnership (PPP) model has yielded only moderate results so far. One reason for this is that most lucrative areas like passenger train operations have been out bounds for potential private investors. This hesitant approach to privatisation has continued for long, despite the fact that the transporter’s own surpluses have been meagre (it is actually running an operational deficit; under-investment in certain designated funds meant for replenishment of assets etc. has allowed it to show measly surpluses).
Even for the financial year 2019-20, PPP component under extra budgetary resources (EBR) — which has increasingly become the mainstay of railway capex — was budgeted at 33% of the total EBR. At Rs 28,100 crore, PPP during the year, according to the budget estimate, was barely 18% of the total capex outlay of Rs 1.6 lakh crore.
The decision to invite request for qualifications (RFQs) for private sector participation to run 109 pairs of passenger -rain routes through 151 modern trains alone is expected to generate private investments of about Rs 30,000 crore. It is very much likely that more routes will be made available for private operators, sooner than later. The private trains in PPP mode in the first phase will comprise only 5 % of railways overall operations; this confirms the scope for private investments in passenger operations is huge.
A clutch of companies including R K Catering, Adani Ports and MakeMyTrip and also airlines, including Indigo, Vistara and SpiceJet are reportedly likely to the bid for operating private trains in the initial phase.
“Trains shall be designed for a maximum speed of 160 kmph. There would be a substantial reduction in journey time. The running time taken by a train shall be comparable to or faster than the fastest train of the Indian Railways operating in the respective route,” the railways said. The concession period for the project shall be 35 years and the private entity shall pay the Indian Railways fixed haulage charges, energy charges as per actual consumption and a share in gross revenue determined through a transparent bidding process.
The 109 origin-destination routes have been formed into 12 clusters across the Indian Railway network. Each train shall have a minimum of 16 coaches. The Railways also said that majority of these modern trains are to be manufactured in India as ‘Make in India’ and the private entity shall be responsible for financing, procuring, operating and maintaining the trains.
Suggestions to broad-base PPPs is not new, but IR has not been able to implement the schemes.
The DK Mittal committee in its report in 2014 suggested PPP investments in core operational areas of the railways. All wagons could be owned by the private sector, it has said, adding that passenger trains could be either fully owned by private players or taken on a lease basis from IR. There have also been suggestions to have private train operators paying rentals to IR for track access, but none of these has materialised.
A committee headed by Niti Aayog member Bibek Debroy had also advocated private participation in core railway projects. The Debroy panel also called for commercial accounting, track access, decentralisation and an independent regulator. But the powerful railway board has apparently been wary of privatsation. With the borrowing cost of the railways surging, the government has apparently put its foot down. Large-scale private investments seem to flow in, to complement the limited budgetary and own resources of the railways, to fund its humungous modernisation requirements.
In the Budget FY20 presented in July last year, the PPP mode has been recommended for tracks, rlling stock manufacturing and delivery of passenger and freight services. “We have lined up a whole gamut of investments for regional connectivity through government expenditure and private funding also. It has been presented to me and we have gone through them,” railway minister Piyush Goyal had said, immediately after that Budget.
According to Yadav, the new private modern trains will be placed in Bengaluru from where they will be despatched to different routes. He added that one main criterion of selecting the routes for private operations is the unmet demand of the passengers. Railways, he said, have estimated the requirement of reserved seats annually at 8.4 billion. “The purpose of these private trains is to fill the gap between the demand and availability of reserved seats. The estimate is that Railways will carry 13 billion pasesngers annually by 2030 and 18 billion by 2040,” he said.
Aiming to provide airline-like services to train passengers, the national transporter has said that the private players, apart from fixing fares, have to also provide facilities like catering, cleaning and supply of beddings to passengers. Earlier this year, the Niti Aayog and the Indian Railways came out with a discussion paper for running 150 trains on 100 routes by private operators, envisaging an investment of Rs 22,500 crore. The discussion paper titled ‘Private Participation: Passenger Trains’ has identified 100 routes, including Mumbai Central-New Delhi, New Delhi- Patna, Allahabad-Pune and Dadar-Vadodara. Other prominent routes include Howrah-Chennai, Howrah-Patna, Indore-Okhla, Lucknow-Jammu-Tawi, Chennai-Okhla, Anand Vihar-Bhagalpur, Secunderabad-Guwahati and Howrah-Anand Vihar.