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18th October – Railways Privatisation

Indian Railways has launched itself on the road to privatisation by flagging off the Tejas Express running between Lucknow and Delhi and announcing plans to privatise the running of as many as 150 passenger trains.

Details –

The Tejas Express will be run by IRCTC, a subsidiary of the Railways. So there is not much of real privatisation there to begin with. IRCTC cannot have been expected to drive a hard bargain for itself, but that will happen when full-fledged private firms bid for various tasks.

Difficulties –

It is difficult to privatise a portion of the Railways’ operations (total privatisation is not even being contemplated) as it is strongly vertically integrated. Logically, tracks and signalling, common resources accessed by all private train operators, should remain in state hands. But this can also be privatised much later, if at all.

British example

  • Privatisation of what was earlier the British Rail has through the intervening decades politically been hugely contentious. Those sceptical of privatisation argue it has not worked as fares are higher, there are more delays, the franchising system is floundering and passenger dissatisfaction is high.
  • On the other hand, those in favour point to the rise in public use of the railways to argue that the system works. The problem is that independent socio-economic changes — rise in fuel costs, greater road congestion, lower unemployment — have raised the number of rail journeys undertaken. So public use cannot be cited.

The Japanese model –

  • Where privatisation has indisputably worked is Japan.
  • Five of the seven companies into which Japanese National Railways was broken up in 1987 were in the black last year. What has helped is the companies being allowed to run commercial and real estate businesses, so they are able bear the cost of upkeep and improvement in services.
  • Another good idea was splitting the legacy railways on basis of geographical area, not functions like tracks and trains. This has helped get round the difficulty of breaking up a highly integrated operation like the railways.

Way forward –

  • Private ownership tends to improve services and cut costs, particularly under conditions of competition. When the public suffers due to the perceived laid-back attitude of a state-owned enterprise, support for privatisation grows.
  • But ensuring competition within a public utility needs complex regulation that has to offer a level playing field to all players sharing common infrastructure. The quality of regulation that a country is capable of is critical.
  • It is also vital for the Indian Railways, steadily losing market share to fossil-fuel burning road transport, to reverse the trend.

Conclusion –

Recently, the Planning Commission (of Railways) sought to take away the task of developing key stations from the hands of the Railway board and pass it on to a group of secretaries, because of lack of progress. So, the case for privatising parts of railway operations has gained from the way they are currently run.

SourceThe Hindu Business Line

QUESTIONPrivatisation of railways can be a panacea for all ills associated with the comforts and security of the passengers but regulation would still be a necessity. Discuss.

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