The EU (European Union) directive no. 91/440 provides the road map for privatisation of railway systems, which basically involves separation of infrastructure and operations. A regulator is appointed to ensure a level-playing field and look into allegations which are bound to arise, viz. favoured treatment of the state-owned operator (if there is still one left in the fray!).

While the experience on various European railways has been a mixed one, the privatisation of BR (British Railways) which began in 1993 has been an unmitigated disaster, with passenger fares zooming to new heights, especially hurting the daily commuters. In fact, none of the various European countries that came to study Britain’s railway privatisation chose to adopt the same model. Apart from the fact that the loss-making infrastructure business had to be taken over once again by the government, the success of the state-run East Coast line has prompted a clamour for throwing out the private operators, whose performance has not matched the steep hike in fares.

Unlike airlines and road transport, the privatisation of railways is an entirely different ball game. While the wide, open skies offers unlimited opportunity for an individual aircraft to use the airspace, provided it sticks to a given altitude and course allotted to it by the air traffic controller to avoid a collision, or other alternatives to a toll-road exist for a vehicle, the occupancy of a given section of rail-track has to be shared between various trains.

Not only the rail-track, but associated items of infrastructure, viz. signalling, stations, etc, which is presently owned by the government also need to be shared between competing trains, and therein lies the area of inevitable conflict. For who gets the priority to move—the private operator or the owner of the infrastructure, i.e., the government ?

To enable privately-owned entities to compete in passenger and freight operations, access to track has to be given on an equitable basis which means appropriate time-tabling of trains belonging to different players and equitable distribution of the available paths, both for passenger and freight operation.

Operation of container trains, which has now a number of private players, has often faced these problems, though not of a very serious nature. Both a government-owned, such as CONCOR (Container Corporation) and a private-operator train loads have to give precedence to Rajdhani, Shatabdi and other super-fast trains.

On the other hand in the US, Amtrak passenger trains run by the federal government routinely have to give precedence to the freight-loads run by various private Class-1 operators, whose tracks these Amtrak trains share!

Undoubtedly, such issues are likely to be far more serious when the entire passenger and freight operation are to be thrown open for competition, when the question of fair competition would arise. In the case of civil aviation in India, the government-run airline, Air India, shares the airport authority facilities and take-off and landing slots with half a dozen private airlines.

Inevitably, allegations of favoured treatment of the state-owned operator are bound to arise. Very often, the complaint is regarding the private operator having to run services which do not make profit, and whether they will be compensated for the loss if they do so. On the other hand, how is the performance to be judged, if the state alone has to carry out non-viable services as a public interest obligation? Moreover, questions will always be raised regarding equitable track-access by viable and non-viable services: “Will the state operator’s passenger-side be limited only to non-viable services, and will the socio-political scenario permit this?”

Ultimately, the million-dollar question remains, “What will such competition achieve?” The private sector is in the business to make money. In the event of going out of business, the private sector is unlikely to get bailed out a la Air India. Hence, how far can such competition be fair?
In the event of rail operations being opened for competition to private players, will the infrastructure continue to be controlled by the government? If so, how far will that be deemed as ‘level’ playing-field ?

Inevitably, conflict of interests arise in day-to-day working, which the regulator will have to deal with. Will the regulator be able to dispose off these disputes quickly, or allow it to bog down the system in a series of time-consuming and costly litigations, making the whole exercise counter-productive. Undoubtedly, the issues involved are quite complex, and even for a developed economy like that of Britain—with a comparatively low-priority freight sector—it has been highly unpopular.

Given the private sector’s penchant for litigation at the drop of a hat, as witnessed by the recent coal mines auction imbroglio, problems are bound to be far more complex in the Indian context, which has poorly-developed institutional structures and where both the passenger and freight segments are equally crucial with Railways seen as an engine of economic growth.

A mere separation of policy-making function from operations at the Railway Board (ministry level) and the setting up of an inter-modal regulator perhaps may not automatically lead to any basic change in the quality of service to the customer.

If competition in railway operations is inescapable for improving efficiency and transparency, many fundamental changes in the organisation will be required, which may not only be painful and disruptive, but also take a long time to fructify. The move would also face strong opposition from the well-entrenched interest groups.

Undoubtedly, the regulator should be “at an arm’s length from the government” when Indian Railways itself is one of the regulated entity.

Perhaps, as in the case of Commissioner for Railway Safety, the proposed regulator could also function under the ministry of civil aviation.

However, as has happened with privatisation of the air sector for making Air India more competitive and efficient, the so-called arm has not only been invisible but also short and quite amenable to twisting!

By RC Acharya

The author is former member, Railway Board