Skip to main content

Indian Railways has Opened Doors to the Private Sector


By Mahima Kapoor
Indians Railways has launched the process of opening up train operations to private entities on 109 origin-destination (OD) pairs of routes using 151 modern trains. The present bid is only for a fraction of the total train operations – 5% of the 2,800 Mail and Express services operated by Indian Railways. The railways have moved ahead with a long-pending plan, setting a tentative schedule for private train operations, expected to begin in 2023 and in 12 clusters.

WHY SUCH A MOVE?
Ø  The Railway Board says five crore intending passengers could not be accommodated during 2019-20 for want of capacity and there was 13.3% travel demand in excess of supply during summer and festival seasons.
Ø  The overall objective, however, is to introduce a new train travel experience for passengers who are used to travel by aircraft and air-conditioned buses.


WHY IS THE MOVE SIGNIFICANT FOR INDIAN RAILWAYS?
·     For the Railways, one of the largest organizations in the country, operating not just trains for passengers and freight, but also social institutions such as hospitals and schools represents a radical change.
·     It was estimated that a one-rupee push in the railway sector would have a forward linkage effect of increasing output in other sectors by Rs.2.50.
·     The Debroy committee found this significant to take the 'Make in India' objective forward. It asked for the entry of new operators "to encourage growth and improve services."
·     The panel also noted that passengers were willing to pay more if they had guaranteed better quality of travel and ease of access.

NOW THE QUESTION ARISES, WILL THIS STEP BE SUSTAINABLE?

The strategy of below-cost pricing will make it difficult for the private sector to compete. On the other hand, higher prices needed to cover the costs might bring them in direct competition with airlines, pricing them out of the market. Apparently, private operators would have to raise the level of their offering even higher, to justify higher fares, and attract a segment of the population that is ready to pay for the difference. The government would have to explain that it has monetized its expensive fixed assets such as track, signalling and stations adequately for the taxpayer, who has paid for them. Apart from all the challenges, Will the private players able to cover the losses that our Indian railways even couldn’t able to? Will the higher prices let them stay in the market?

Well, the topic is quite debatable. As per the NITI report, 77-80% of total losses in the passenger segment are in the non-suburban segment, within which IR incurs losses in all classes for 3rd AC. The proposed model if scaled up, could help IR reduce such losses and allow it to have profitable earnings.On the other hand, to depend upon disinvestment for loss coverage will be problematic. However, critics argue that bringing private players in will affect the affordability and inclusivity factor that the railway is known for which will make it difficult to stay.

This is a rational decision but these are just estimates. Real repercussions can only be known after implementation.


Labels:

Comments

Post a Comment

Popular posts from this blog

Past makes present: Elon Musk 's anti union tweet

Who would have thought that a tweet made in 2018 will cause hassle in someone’s life in 2021. We are talking about none other than Mr. Elon Musk, CEO of Tesla, Inc. He needs no introduction but more than him, his tweets are famous. Elon Musk has been seen tweeting sharp and blunt statements very often but this time he faced serious repercussions as well. Swami Vivekananda rightly said that the present is determined by past actions. It all started in 2018 when Elon musk is his tweet, wrote: “Nothing stopping Tesla team at our car plant from voting union. Could do so tmrw if they wanted. But why pay union dues & give up stock options for nothing? Our safety record is 2X better than when plant was UAW & everybody already gets healthcare.” This tweet came in the limelight in 2021 when National Labor Relations Board found it oppressive and threatening. As per NLRB the tweet by Mr. Elon Musk was unlawfully threatening the employees with the loss of stock options if they decided ...
Post a Comment
Read more

Russia’s Melting Snow May Cost the World Economy 2 Billion Dollars

The impact of climate change on a vast permafrost area of Russia has become a principal apprehension for the country. This is primarily due to thawing of once permanently frozen ground which covers more than half of Russia. The liquefication of snow is putting buildings, pipelines and other infrastructure in peril. This problem needs to be addressed imperatively because the scale of damage will escalate every year. Rising temperatures are the epicentre of anxiety for mining, oil and gas companies. The permafrost area accounts for 15% of Russia’s oil and 80% of its gas operations. It is also home to miners including MMC Norilsk Nickel PJSC, the biggest refined nickel and palladium producer. Multiple new craters have been found in the gas-rich Yamal region, which is a risk to pipelines. By 2050, global warming may jeopardise about a fifth of structures and infrastructure across the permafrost area, costing about $84 billion. Residential real estate, worth $53 billion, might be als...
Post a Comment
Read more

Changing Environment For Local Business In Sri Lanka; Government Initiates The Revolution

Local industries and businesses are the backbone of the economy of any country. Additionally, Sri Lankan Government defines a local company as one with a minimum ownership of 51% of a Sri Lankan. To help these companies grow, the Sri Lankan Finance Ministry has proclaimed a circular enlisting the priorities to the local companies. Moreover, this move from the government may bring some salient alterations in the condition of the local manufacturers. The government has also come with up steps that will augment the local industries across the different domains. These domains include IT sector, construction, etc. The circular, as issued by the government includes relevant documentation regarding sourcing of resources and products. Additionally, sources point towards the fact that the government is hoping to extend support to the domestic sector and help them grow. Besides, the major focus is on the three sectors- IT software and hardware, construction and furniture and allied products. Pos...
Post a Comment
Read more