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18th February – Railways privatisation model

Context– The Kashi Mahakal Express is the country’s third ‘corporate’ train after the two Tejas Express trains between Delhi-Lucknow and Mumbai-Ahmedabad started over the past few months.

What is this model?

  • In this model, the corporation takes all the decisions of running the service– fare, food, onboard facilities, housekeeping, complaints etc.
  • Indian Railways is free from these services and gets to earn from IRCTC a pre-decided amount, being the owner of the network. This amount has three components- haulage, lease and custody.
  • The haulage charge IRCTC is paying for the Tejas trains is in the range of Rs 800 per kilometer. This includes use of the fixed infrastructure like tracks, signalling, driver, station staff, traction and pretty much everything needed to physically move the rake.
  • On top of that IRCTC has to pay the lease charges on the rake as Indian Railways coaches are leased to its financing arm, the Indian Railway Finance Corporation (IRFC). 
  • Added to that there is a per-day custody charge, of keeping the rake safe and sound while it is in the custody of the PSU.
  • The company willing to share the highest percentage of revenue will win the contract.
  • Private players may not need to pay lease and custody charges as it is expected that they will bring in their own rolling stock.

Advantage –

  • It creates the environment for enhanced service quality and user experience for the passengers.
  • Indian Railways doesn’t have to suffer the losses associated with running these trains thanks to under-recovery of cost due to low fares and its own hefty overheads.
  • Indian Railways doesn’t have to suffer the losses associated with running these trains thanks to under-recovery of cost due to low fares and its own hefty overheads.
  • The government wants private players and maybe also its own PSU, along with Indian Railways, to share the load of pumping in more trains into the system.

QUESTIONShould Indian Railways be privatised to prevent it from going the Air India way?

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