Maharashtra Economic Development Council महाराष्ट्र आर्थिक विकास मंडळ

Viewpoint: Privatizing Indian Railways

13 JUL,2020 | MEDC

The Indian Railways has initiated the process of shortlisting private companies to run 151 modern passenger trains on 109 routes. However, the success of the part-privatization drive by the Indian Railways will depend on several factors including safety, hygiene, comfort, affordability and various value added services. Privatization of the railways in the country is an idea whose time has come. It should not be seen as a necessary evil but as a way to serve the larger public interest. Innovation in service delivery and customer loyalty are going to play a key role in this milieu. At the same time, the railways employs 1.27 million Indians in various capacities, and so privatizing it will not be easy from the political perspective as the government will need to adequately answer the labour unions. Also, privately run trains need clear regulatory signals, which are not always forthcoming. However, the dedicated freight corridors connecting metropolitan cities could create additional capacity in an otherwise congested system, that will need high speed rail investment to maximize its economic potential. The ministry says that privatization will need corporate sector investment of around Rs. 30,000 crore and claims that the majority of the rakes would be domestically manufactured, thus providing a boost to local employment. Privatization of the railways certainly has its share of benefits, but it needs to be well planned to adequately compensate those who are likely to suffer from it. A start has to be made in this direction, and the sooner the better.However, there are also some issues connected with the nature of the railway sector. Any plan based upon private operators employing state-owned infrastructure is tenuous, especially in a democracy. If the private players are truly profit maximizing, which is what one would expect them to be, they would naturally be drawn to the most remunerative routes – whether or not they genuinely serve the larger socioeconomic interest. Unless a lot of homework is done, there is a danger of what happened in the Air-India divestment plan repeating itself in the Indian Railways. Dispute resolution will not be easy. The need of the hour is to create an independent regulator who could help resolve the inevitable disputes that arise in any public-private partnership. Privatization of the Indian Railways has been on the discussion table since at least 1993, and it is indeed a worthwhile objective, but it needs to be conducted with due diligence.

*Photo Credit: Google

Viewpoint: Privatizing Indian Railways

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