On track for privatisation? India must keep British Rail’s privatisation disaster in mind to avoid similar pitfalls

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October 15, 2020 6:50 AM

While investment by the private sector is most welcome, it should not end up with a lot of rolling stock being purchased, and with no matching maintenance facility being created. The operator may simply walk away while banks or investors who would have financed the whole project left holding the baby!

Moreover, the proposed private trains will be sharing track space with other passenger and freight trains, which could lead to disputes for precedence.Moreover, the proposed private trains will be sharing track space with other passenger and freight trains, which could lead to disputes for precedence.

The mega plan for privatisation of passenger trains unveiled by the Railway Board a couple of months ago involves a total of 151 trains in 12 clusters, with a minimum of 16 coaches in each train running at 160 kmph. Eventually covering 109 routes, compared to the 9,000-plus passenger trains that had been time-tabled to run every day prior to the Covid-19 lock down, this may not be much, but it is a good beginning.

Over 120 RFQ from 15 parties is an indicator of the project’s popularity. The bidders are to be short-listed by November 2020 for the final round, contracts placed by April 2021, and the first lot of private train sets to arrive by April 2023.

Reportedly, the operator may be allowed to import three trains in each of the 12 clusters while the rest are to be manufactured in India. The bidding is to be on a revenue-sharing basis; the one that pays the Railways the most, wins.

However, perhaps a short history lesson, from British Rail, would be in order. During the Margaret-Thatcher era, it went for massive privatisation that proved an unmitigated disaster. Treating maintenance of infrastructure, rolling stock maintenance, and passenger and freight train operations, etc, as separate activities were all privatised as distinct business units, and scores of private entities were created for every possible activity of the British Rail.

However, a few years after, all hell broke loose when a serious mishap took place at the Potter’s Bar station involving human casualties. A statutory enquiry revealed that that the new company, called ‘Network Rail‘, that now owned rail infrastructure had been cutting corners, resulting in the mishap.

With stringent conditions for liability and compensation in case things went wrong, the first people to reach an accident site weren’t not relief teams, but lawyers who had to find who and what went wrong to establish the liability, and due compensation!

A public-interest report from the Centre for Research in Socio Cultural Change (CRESC), a think tank based in Manchester, the UK—titled The Great Train Robbery: Rail Privatization and After—had raised the issue that ‘public subsidies are essentially paid out to shareholders as dividends and Network Rail’s large and unsustainable debt, which has negative consequences for physical infrastructure and likely means that rail, will one day have to be bailed out by the public.’ Ultimately, it had to be ‘bailed out’, and then taken over by the government, which mercifully will not be the case with the Railways, as only a few private train operators (PTOs) are to be inducted, and rest of the system is not being privatised!

While the PTO is to introduce coaches or trains with technology superior to that of Indian Railways, the upgrading of track for it to support running of trains at 160 kpmh from existing 120 kpmh will need to be carried out by IR on top priority.

Moreover, the proposed private trains will be sharing track space with other passenger and freight trains, which could lead to disputes for precedence. For the private train to be punctual, it may have to be accorded priority at the cost of other trains, to avoid any penalty for being late.

Anticipating a plethora of such problems that may arise in the PPP initiative, a ‘regulator’ is proposed to be created. With commissioning of the West and East Dedicated Freight Corridors, the private sector may get an opportunity to invest in freight wagons as well and run them, keeping the proposed regulator quite busy.

While investment by the private sector is most welcome, it should not end up with a lot of rolling stock being purchased, and with no matching maintenance facility being created. The operator may simply walk away while banks or investors who would have financed the whole project left holding the baby!

Again, an observation of CRESC on British Rail’s fiasco: ‘Perhaps best known is the systematic gaming of the train operating franchise system. Franchisees—as in the catastrophic case of the East Coast Line—can walk away from the franchise without serious penalties when the ludicrously unreal projections that won the contract in the first place turned out to be fantasies.’

Hopefully, the Indian Railways will learn from the pitfalls of the British Rail privatisation, and be able to carefully avoid them.

The author is Former member, Railway Board
ram34034@gmail.com

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