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Privatization of railways – What, Why and How

The government of India envisages around Rs 50 lakh crore of investment in rail projects up to 2030, but as per the Union Budget 2019, only a part of it can be financed through government coffers, and public-private partnerships are needed for faster development. The decision to allow private players to run passenger trains stems from that policy.

What is Privatisation of railways?

The opening up of railways to private players including the management, administration or all of railways commercial and public functions to be decided by the controlling private entity 

Why Privatization of railways?

  • Running of passenger trains is a loss-making business for Indian Railways. It recovers only around 57 per cent of the cost through tickets on an average.
  • It is estimated that almost 70 percent of freight trains, which now jostle for space with passenger trains on the overcrowded Indian Railway network, will shift to the two upcoming Dedicated Freight Corridors from December 2021. This will free up a lot capacity to introduce more passenger trains with better services and higher speeds
  • Railways in India is highly bureaucratic organisation leading to lower productivity and inefficiencies

How private players will operate?

Railways have divided routes into 12 clusters based out of major city centres, such as Patna, Secunderabad etc. Each cluster is an independent business project, inviting a private player to manage it through bidding.

How Privatization of railways is good for India?

  • It will save public money and release the government to foresee other important issues like poverty, healthcare and education.
  • Privatisation could lead to better and clean platforms, trains, adequate water supply and other amenities.
  • Politics for electoral gains will also take a back seat and railways could move towards a more sustainable future.

How Privatization of railways may be a challenge for India ?

  • It may lead to expensive ticketing prices which may be against the purpose of affordable transport to the country.
  • It may lead to unbalanced regional growth of infrastructure and related development associated with railway connectivity.
  • Privatization will lead to lay-offs in jobs resulting into unemployment and livelihood concerns.

So, In the end we can conclude that

Participation of private players in the development of railways is a much-needed step, government must ensure creation of level playing field for private players with an independent regulator – with statutory backing 

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