Railways working on six transformative ideas to change the face of national transporter


A proposal to introduce private passenger trains is well on track. The only issue is the venture by Indian Railways (IR), part of its move to modernise operations, may run late.

Also on the table is a somewhat daring proposal: to corporatise all its seven production units, such as the Raebareli-based Modern Coach Factory and the Integral Coach Factory in Chennai, which last year sprang a surprise by rolling out the high-speed Train 18, later renamed the Vande Bharat Express. The project to corporatise the production units has also been delayed as trade unions representing about 82,000 workers in the seven factories have fiercely opposed the idea of converting their workplace into a public sector undertaking (PSU). They see the move as a ploy to eventually sell the asset to a private conglomerate.

ET Magazine has learnt that these two reformist ideas, despite being delayed, are well on the shortlist of six transformative projects the IR has retained from a wider list of 11. The new Narendra Modi government had approved these 11 in mid-June for implementation within 100 days of returning to power. The government will complete 100 days on September 6 if the days are counted from the prime minister taking oath on May 30. Railway Board Chairman Vinod Kumar Yadav’s letter dated June 18, which had enclosed the 100-day action plan, has asked railways officials to complete their tasks by August 31.

ET Magazine spoke to railway officials, three retired chairmen as well as union leaders to assess the progress on the ground and to understand how the projects will shape up.

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When this article went to print, only two of the six projects had been completed: the Rs 13,490 crore project to increase train speed on the Delhi-Kolkata and Delhi-Mumbai routes from 130 kmph to 160 kmph and the handing over of two trains to Indian Railway Catering and Tourism Corporation (IRCTC) to run. The IR subsidiary has not yet started operating the trains.

Of the other projects (see Key Targets and Status below), the railways has almost completed the blueprint for eliminating 2,568 manned level crossings in key routes by 2023. The ambitious project involving construction of road overbridges and underpasses will cost over Rs 50,000 crore, according to the railways’ assessment. IR has decided to ask only for central funds, thereby avoiding any negotiations with respective state governments for sharing of financial burden. The proposal will be sent to the Cabinet Committee on Economic Affairs for approval as soon as inter-ministerial consultations — mainly with the ministry of finance and the NITI Aayog — are over.

In addition, the railways has now provided WiFi facilities to 3,767 railway stations, according to data available till August 28, up from 1,603 in May-end. The target was to cover 6,485 stations by August 31, according to the Railway Board chairman’s letter.

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An idea that were part of the 100-day action plan but was stopped in its tracks was voluntary surrender of subsidies while buying tickets. That would have helped the railways boost revenue from the loss-making passenger segment. IR recovers only 53 per cent of the cost incurred from passenger transport business. Other ideas that are no longer being pursued — possibly because of political ramifications — are rightsizing IR and introduction of performance-led appointment in Railway Board, the apex decision-making body of India’s largest transporter.

However, IR has not shied away from pursuing at least two challenging tracks — operating private passenger trains and converting its factories into a PSU despite opposition. SS Khurana, who was Railway Board chairman in 2009-10, says it will be good for the IR if it loses its monopoly and faces some competition.

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But there are bottlenecks. “The challenge will be to convince private players to invest. They will continue to be worried, as stations, platforms, tracks and signalling remain with the railways,” he says.

Private operators who had been running container trains since 2006 in limited pockets have at times expressed their frustration that their business was completely dependent on the railways alone.

Another former chairman of the Railway Board, Vivek Sahai, however, says the government needs to be careful. “It must not hand over all its lucrative routes to private companies,” he says, citing the example of how Air India is now getting pushed into a tight corner due to competition from private players.

The details of how the government will bring in private players are not yet clear.

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Last month, Railway Minister Piyush Goyal said in the Lok Sabha that privatising the national transporter was out of question. But a careful reading of the minister’s speech indicated that he was in favour of getting private players on board for the sake of what he says “national interests”. Goyal also defended the government’s intention to corporatise some of the railways’ units. The minister’s statement was in a way an extension of what Finance Minister Nirmala Sitharaman said in her budget speech. The FM said the government would need Rs 50 lakh crore to improve railway infrastructure between 2018 and 2030. The requirement of such a gigantic amount was seen as an indication to open up the IR for private bidders.

The arrangement to let IRCTC operate trains could well be the basic template to engaging private players. According to a railway minister circular dated August 13, the railways would hand over two Tejas train rakes to IRCTC on a trial basis. The subsidiary would get advertising rights on the coaches and, most importantly, the freedom to decide its own fare.

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In return, it will pay the railways a monthly fee, called haulage charge in industry parlance. The pact will be valid for three years. IR has already handed over to IRCTC the Delhi-Lucknow Express and the Ahmedabad-Mumbai Central Express for operations.

IRCTC on August 22 filed draft papers for its initial public offering. The government is looking to reduce about 12.5 per cent stake via the share sale and mop up Rs 500-600 crore.

If a private conglomerate is willing to run its own trains under similar arrangements, and if the railways doesn’t withdraw its trains from the same routes, there is unlikely to be any major resistance. That would not be called a sell-off. But there are concerns in some quarters that the railways might eventually turn into an Air India jostling for space in profitable routes with private players.

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In its 100-day action plan, IR said it would float an expression of interest to identify potential routes and private operators willing to participate in the bidding process, apart from preparing a request for quotation and request for proposal. These would be required for an effective public-private partnership deal. The railways also said it would initiate consultations with trade unions before engaging any private player.

The trade unions are opposed to the very idea of private players entering the domain of railway operations. But, it seems, their stand on private trains is somewhat softer as compared with the stand against the railways’ move to put the factories under one PSU. “We have protested both at the grassroots and apex level (Railway Board) against the board’s move to corporatise railway production units. Let the factories get more freedom, we have no issue. But we will oppose if they are made into a PSU. We understand that is the first step towards divesting the railway jewels,” says Shiva Gopal Mishra, general secretary of All India Railwaymen’s Federation. Their fear is understandable as NITI Aayog has made its intentions clear on this subject. It has repeatedly said the government must divest all PSUs, barring a few that are in strategic sectors such as oil and defence.

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As documents suggest, the railways plans to create a PSU called Indian Railway Rolling Stock Company. A CEO would head each of the production units. The CEOs would report to a chairman and managing director. The transporter wants its newest production unit, the Modern Coach Factory at Raebareli, to be hived off first. On August 27, Congress general secretary Priyanka Gandhi Vadra joined workers at the Raebareli unit protesting the move.

The proposed corporatisation has positives and negatives, says Arunendra Kumar, who was Railway Board chairman from 2013 to 2014. Becoming a PSU will give the coach factory more operational flexibility, he says. “It will help production units to look for international technologies, cut costs and explore export markets. But it will also mean the railways floating tenders worth thousands of crores of rupees annually to buy locomotives and coaches. What if the tender process gets delayed?”

Discussions with Rail Bhawan officials indicate the transporter is willing to bite the bullet and undertake dramatic reforms, including running of private passenger trains and corporatising its factories. The only hiccup is that the decisions won’t arrive at the speed of a Vande Bharat Express.





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