Indian Railways is planning to rope in private players to run trains that would provide world-class facilities. How effective that would be is anybody’s guess but the start is definitely commendable.

Over the next few years, as many as 150 trains will be run by private operators offering world-class technology and services, the national transporter has planned. These private operators will be identified through a bid process and will run trains connecting key routes and cities. The trains will ply on routes allocated by Indian Railways on payment of a certain fees. As of now, 50 routes have been provisionally identified.

Indian Railways runs one of the largest logistics and transportation networks in the world. Its sheer scale of operations makes it a challenge to cater to demands of both freight and passengers, in terms of congestion in routes, leading to delays, cleanliness, as well as problems of safety and security. Besides, lack of private investment has been one of the major roadblocks for network expansions and modernization. In fact, railways end up cross-subsidizing passengers by overcharging freight.

The first steps towards private trains have already been taken in New Delhi’s Rail Bhawan, the headquarters of the Railways. Last week, a five-member empowered group of secretaries including NITI Aayog CEO Amitabh Kant, railway board chairman V.K. Yadav and urban affairs secretary Durga Shanker Mishra was set up to define the modalities of the bidding process, along with bid documents and concession agreements for developing 50 railway stations and permitting private companies to operate 150 passenger trains.

A senior railway ministry official told Mint that officials are still in the process of finalizing the routes and the timings for the modern trains. “Once the routes are finalized, an expression of interest (EoI) will be floated soon," the official said, adding the entire revenue model, with regard to how much Indian Railways will earn from the exercise is yet to fixed.

The tourism and catering arm of the national transporter, Indian Railway Catering and Tourism Corp. Ltd (IRCTC) on 4 October launched the state-of-art high speed Tejas Express for its first run from Lucknow-New Delhi at the beginning of the festival season. The service performance will also help railways prepare the blueprint for more such offerings.

Paras Jain/Mint
Paras Jain/Mint

In a first, IRCTC has offered a complementary travel insurance coverage of 25 lakh. Besides, those travelling by India’s first private train will get refund of as much as 250 in case the train is delayed.

On the Tejas Express, meals are served onboard on trolleys by crew members, dressed like air cabin crew. Apart from tea and coffee vending machines, water is provided through RO machines. Also, IRCTC has the flexibility to decide passenger fares.

While private train services have the potential to be a game changer for the Indian Railways, experts believe much of the success will hinge on fares. A pricing structure that is significantly higher than what is now on offer may dent demand for these modern trains.

According to Madan Sabnavis, chief economist at CARE Ratings, while private sector participation will bring in capital and more investment, the pricing and routes will be two crucial determinants of success.

“A lot will depend on pricing, speed of the train, and what kind of preferences will be given to private trains over the public trains. These preferences will be in terms of use of tracks," Sabnavis explained.

Currently, even semi-high speed trains such as the Shatabdi or Rajdhani are not able to run at maximum speed because of congestion and limited railway lines or network. Adding more trains will require expansion of railway lines. As a result, creating more space for these trains will have to be worked out, he said.

However, the commissioning of some portion of dedicated freight corridor by 2021 will free up more routes that can be used for the new trains. As to revenues for the national transporter, there are expected to be gains if these private and modern trains run of several routes across the country.

“Just having one or two trains will not make a lot of difference (to government revenue). If there are few private trains, it will make few hundred crores, which is nothing in front the sheer scale of the railway budget. This model will work and give enough revenue if it is spread across the country," Sabnavis said.