Right track: Here’s Why Indian Railways needs big doses of private investment

By: |
March 18, 2021 7:00 AM

National Rail Plan estimates a requirement of Rs 16.7 lakh crore (at today’s prices) over just the next decade, and then another Rs 10-11 lakh crore for each of the next two decades if the Railways it to be truly transformed.

The Railways will have to reverse the deterioration that its operating ratio has seen over the years, mainly by tackling its losses from the passenger-business and easing the punishing cross-subsidisation burden on the freight business and the upper-class passenger segment.The Railways will have to reverse the deterioration that its operating ratio has seen over the years, mainly by tackling its losses from the passenger-business and easing the punishing cross-subsidisation burden on the freight business and the upper-class passenger segment.

It is hard to disagree with railway minister Piyush Goyal on the need for more private investment in the Railways. Goyal, replying to calls from the opposition parties not to privatise the Railways, said that the Railways will “never be privatised”, but more private investment should be encouraged for efficient functioning. Indeed, with true private sector participation, from building and maintaining station infrastructure to running private freight and passenger trains, the Railways would be forced to get competitive or fall behind like Air India has.

The National Rail Plan estimates a requirement of Rs 16.7 lakh crore (at today’s prices) over just the next decade, and then another Rs 10-11 lakh crore for each of the next two decades if the Railways it to be truly transformed. And, as this newspaper has pointed out before, with the Railways lacking these funds, private sector involvement is an imperative. While this will mean, as per the National Rail Plan, that 72% of the wagons will be owned by the private sector by 2031, up from 12% today, for such private sector investment to actually materialise, railway transport will have to get more profitable. The Railways will have to reverse the deterioration that its operating ratio has seen over the years, mainly by tackling its losses from the passenger-business and easing the punishing cross-subsidisation burden on the freight business and the upper-class passenger segment. Indeed, thanks to over-charging, the Railways’ share of total freight has fallen from 85-90% in the 1960s to around 28% today.

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