What should be mode of privatization in railways?

Abstract

Indian railway introduced its first private train from Lucknow to New Delhi Tejas Express on October 4, 2019, and the national transporter also announced to start 150 more such private trains on 100 identified routes. This news erupted a new debate about the privatization of more than 150 years old, pubic transporter for better services. The stated objective behind introducing private trains has been the world-class services, innovations, technology infusion, and resources for investments. In the budget speech of 2019, the finance minister stressed for public-private partnerships in the railway to meet the capital requirements by 2030 that is estimated to be INR 50 trillion. Privatization is not new on the railway. It has been there since the beginning, but the recent debate erupted in the backdrop of complete privatization of railway, which is the biggest employer under the government and also a provider of affordable transport to masses, which has been the core of retaining the railway transport under the government ownership. With the rising per capita income and increasing middle class and upper class in the country, there have been demands for better railway services comparable to Chinese and Japanese railway services. With the mounting pressure on the government for betterment, the increasing cost of operation and resource crunch, pushed the government to seek the private sector intervention. As of now, it is the clearly stated policy of the Railway to have more and more private participation for better and cost-effective delivery of services. Whereas the Railway Minister has spoken that there is no plan for privatization of Railway. Even the Bibek Debroy committee has also clearly stated that the committee is not recommending the privatization, but yes, the committee suggests for more liberalization, which is the existing policy of the Railway. The first step in the direction of direct privatization was giving 100 railway stations to private players for redevelopment and management except for train operations and ticketing. And now the government has decided to launch 150 private trains on 100 routes. Apart from these, the government has decided to divest the shareholding in IRCTC, RVNL, CONCOR, IRCON, RAILTEL, etc. While the government is moving very fast in the direction of more and more roles for private players, the question of what should be the mode of introducing private players becomes very imperative. This policy paper will go into details of different modes of privatization prevailing in the Indian Railway and the different railways of the world. There will be a deeper analysis regarding the nature of rail transport as public goods, on the role of government production and the problems with government production. Finally, this paper wills suggest a suitable policy memo suitable for the restructuring of the Indian railway.