Why has Indian Railways opened doors for private players?

Why has Indian Railways opened doors for private players?

Context:

* Issue of expansion and the modernisation of Indian Railways by opening up to the private sector.

Background:

* According to data maintained by the World Bank, in 2018 India had 68,443 route kilometres of railways. It is among the four largest rail networks in the world, along with the United States, China, and Russia.

Challenges:

* According to the Railway Board estimates around five crore intending passengers could not be accommodated during 2019-20 for want of capacity, and there was 13% travel demand in excess of supply during summer and festival seasons.

* Without an expansion, and with growth of road travel, the share of the Railways would steadily decline in coming years.

* The steady shift of passenger and freight operations from the Railways to other modes of travel was affecting economic growth, by as much as 4.5% of GDP-equivalent.

Bibek Debroy committee:

* In 2015, the expert panel chaired by Bibek Debroy and constituted by the Ministry of Railways, recommended liberalisation and not privatisation in order to allow entry of new operators to encourage growth and improve services.

* It also made it clear that a regulatory mechanism was a prerequisite to promote healthy competition and protect the interests of all stakeholders.

Details:

* Indian Railways has launched the process of opening up train operations to private entities on select routes. Indian Railways has invited Request for Qualifications proposals, for scrutiny of vendor capabilities to bring modern trains for operations on existing rail infrastructure.

* The Railway Board has set a tentative schedule for private train operations, expected to begin in 2023 and in 12 clusters.

Significance of the move:

* From a passenger perspective, this could mean more train services, particularly between big cities.

* Though the present proposal is only for a fraction of the total train operations — 5% of the 2,800 Mail and Express services operated by Indian Railways, The overall objective, however, is to introduce a new train travel experience for passengers who are used to travelling by aircraft and air-conditioned buses. This could help revive positive sentiment towards rail travel and help increase the revenues for the railways.

* The present move could help bring in new-generation trains and attract investments of around Rs. 30,000 crore.

* As per available estimates, 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 move will allow the government to monetize its expensive fixed assets such as track, signalling and stations.

* Despite having the fourth largest network of railway tracks, India still has lower rail density, indicating the scope for expansion. Private investments could help realize this potential.

Way forward:

* An important aspect of the proposal would be the provision of the independent regulator. Only an independent regulator could incentivize and embolden the private players to enter the sector.

* The Government of India has notified the resolution to set up a Rail Development Authority as a “recommendatory/advisory” body, advising government on, among other things, promoting competition, efficiency and economy, and protecting consumer interests.

* The attractive parts of the railways could be opened for private exploitation.

* Train services operated by Indian Railways cover several classes of passengers, meeting the social service obligation to connect remote locations, and adopting the philosophy of cross-subsidy for passengers in low-cost trains through higher freight tariffs.

* Private operators should not be expected to shoulder the burden of universal service norms, and may focus on revenue.