The Indian Railways in June kick-started the process to allow private players to operate certain trains on its network by inviting Request for Qualifications (RFQ) for operation of passenger train services on over 100 routes with 150 modern trains.
Why is this needed?
This initiative has been made by the NDA government to upgrade the rail services of the country. The government envisages around Rs 50 lakh crore of investment in rail projects up to 2030, but as per the Union Budget 2019, only a part of it can be financed through government coffers.
Introducing new, modern trains requires heavy investment in rolling stock like coaches and engines. And then there is the cost of operations, which includes electricity, manpower and all other paraphernalia. In such a scenario, giving upgraded facilities, such as better onboard services and faster trains, would entail a huge modernisation expense for Indian Railways.
As it is, running of passenger trains is a loss-making business for Indian Railways. It recovers only around 57 per cent of the cost through tickets on an average. The rest is cross-subsidised through earnings from its freight operations.
This is where a public-private partnership will allow private players to run passenger trains. The policy.has laid the roadmap for long-term partnerships of the rail sector with the private sector.
The Ministry of Railways said this is the first initiative of private investment for running passenger trains over the Indian Railways network and will attract investments of about ₹30,000 crore.
Where will the private trains ply?
The government has identified 109 busy routes across India to run 151 private trains for the contract.. These are routes with huge waiting lists and offer a potential to earn. The 151 trains represent only around 5 percent of total trains run in India.
For the project, the routes are divided into 12 clusters based out of major city centres, such as Patna, Secunderabad, Bengaluru, Jaipur, Prayagraj, Howrah, Chennai, Chandigarh, and two each for Delhi and Mumbai.
What will Indian Railways get from the private players?
The private operator is liable to share revenues with Railways. The qualifying company that agrees to share the maximum percentage of the yearly revenue with Railways will win the bid.
The Railways will also get a standard haulage charge (rent to use the tracks). The cost was initially Rs. 512 per km, but is under works as of now. This charge is levied as the cost of using railway terminals, physical transportation of the train, track maintenance, signalling and overheads. The cost of the energy will be paid as per actual use.
Railways has also set certain key performance indicators for the private player, like punctuality, reliability, and maintenance of trains. In this, punctuality is the biggest parameter, carrying around 95 per cent weightage. The service reliability means there should not be more than one failure – like a breakdown – in every one lakh km of distance travelled.
Lapse in maintaining the key performance indicators will invite a penalty, to be built into the haulage charges.
What will Railways give to the private players?
The Railways will be contractually bound to provide “non-discriminatory access” to private trains. This means that even if the rail track infrastructure is owned by the railways, no discrimation should be done in providing access to trains of private entities.
The railways is also liable to maintain the tracks, electrical lines and other haulage related infrastructure to ensure no hiccups when plying.
As part of the deal, land will be allotted to private companies to set up facilities for washing, cleaning and periodical inspection of the trains. After the contract period, this land and building will be the property of the Railways.
The tickets to these trains will be booked through the current railway reservation system but the money will be kept in an escrow account.
Who is eligible to bid for the contract?
Since the business of running passenger trains in India has been a monopoly of Indian Railways, no private company in the country has any experience in this sector. Additionally, the invitation is extended to anyone in the world, with or without any experience in train operations.
Railways has, however, set certain conditions for the bid. Any company with a minimum net worth of Rs 1165 crore in the last financial year can apply. This is different for different clusters depending on how much Railways estimates a cluster is worth. But the range is between Rs 1,165 crore and Rs 1,600 crore. There is no bar on the number of clusters a company can bid for. Companies can also bid as consortiums.
Therefore, such diverse business houses like GMR, Bombardier, the Vedanta group, Bharat Heavy Electricals, Bharat Forge, Titagarh Wagons, RK Associates (which is a prominent player in the railway food business), IRCTC, some international equity investment firms are among those that have shown participation intent so far. Railways estimates the list to grow. A second pre-application meeting of prospective bidders is scheduled on August 12.
Proposed benefits to passengers
Improved passenger experience with aircraft-style air-conditioning that allows for automatic temperature and humidity control.
Superior interiors and toilets with a focus on passenger comfort and amenities
Friendly access to physically challenged or divyang passengers
More passenger space available through the use of under-slung or roof-mounted IGBT propulsion system.
GPS-enabled passenger announcement system for onboard announcements indicating station arrivals, the time to next destination, safety announcements etc.
Improved safety features such as fire-retardant interiors, modern couplers with anti-climbing features and wider gangway areas for safe movement between coaches.
The private trains will be able to operate at a maximum permissible speed of 160 kmph on some stretches. The private trains should have higher acceleration/deceleration characteristics that will help reduce train travel time by 10-15% at the existing maximum speed of 130 kmph, similar to Train 18.
Vandal-proof interiors
Energy-efficient rolling stock which makes use of regenerative braking mechanism
The private trains should focus on low maintenance requirements through the use of modern design bogies, stainless steel/aluminium exteriors, brake system etc.