Privatising the Railways

By S N Mathur

It’s common knowledge that the finances of Indian Railways have been severely stressed for several years. Its internal generation of revenues has been inadequate and profits abysmally low.

The government, too, is unable to provide the required budgetary support through its Plan fund allocations. In order, therefore, to revive the fortunes of railways in India, the present government has laid great emphasis on encouraging private sector participation, especially in capital-intensive projects, through the PPP (public-private partnership) route, so that infrastructure expansion can take place and the rapidly growing demands of the economy can be met soon.

Unfortunately, PPP’s track record with Indian Railways has so far been dismal, though the ever-optimistic Planning Commission continues to provide for substantial outlays under this head in the railway’s Five-Year Plans.

A principal cause of failure of the PPP model in the railways has been its failure to nurture the joint partnership the way it should have. Primarily, it is the complex regulatory framework that has deterred private players from joining hands with the railways. Borne out of past experience they also fear they will not be allowed a level playing field, and the conditions governing the partnership shall remain heavily biased in favour of the railways.

With a view to setting things right, the railway minister had recently announced that new policies are being devised, procedures being simplified and greater decentralisation of decision-making being introduced to remove hurdles in doing business with private investors. He also said that five different PPP models have been prepared that are open for investment for station development, construction of freight terminals, and new lines to provide for port connectivity. More info

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