Indian Railways’ Corporate Train model

Indian Railways’ Corporate Train model

Topic: General Studies 3:

• Infrastructure: Energy, Ports, Roads, Airports, Railways etc. 

• Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
• Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Context

Indian Railways plans to offer as many as 500 trains to private operators over the next five years.

The Kashi Mahakal Express is the country’s third ‘corporate’ train after the two Tejas Express trains between Delhi-Lucknow and Mumbai-Ahmedabad. All these three trains are run by PSU IRCTC

How does the model work?

• 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 encumbrances 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. 
• In other words, IRCTC has to pay Indian Railways a sum total of these three charges, roughly Rs 14 lakh for the Lucknow Tejas runs in a day (up and down) and then factor in a profit over and above this.

What powers does IRCTC have?

• Being a corporate entity with a Board of Directors and investors, IRCTC insists that the coaches it gets from Railways are new and not in a run-down condition, as is seen in many trains. 
• In this model, IRCTC has full flexibility to decide the service parameters and even alter them without having to go to Railway ministry or its policies.
• IRCTC gets the freedom to decide even the number of stoppages it wants to afford on a route, depending on the needs of its business model. 
• The Lucknow Tejas, for instance, has two stops, whereas the Mumbai-Ahmedabad Tejas has six stops. These stops are business decisions.

Is this the same model for private tain operators?

• Private players may not need to pay lease and custody charges as it is expected that they will bring in their own rolling stock.
• Companies will have to bid for a network of routes and bids will be finalized on a revenue-sharing model.
• They (companies) will have to pay the haulage (charges for using tracks) charges at ₹686 per km to the railways. Along with this, they will have to have a portion of their revenue.
• Infrastructure, maintenance and safety will be handled by the railways.
• Private train operators will be allowed to procure trains, operate and maintain them, provide better on-board experience and services to passengers, in terms of food, comfort, entertainment, among others.
• Companies will also have freedom to decide the fare

Necessity/Merits of such plans

• To meet growing passenger demand: Indian Railways runs around 13,000 passenger trains every day and an additional requirement of 3,000-4,000 trains is estimated.
• Over the next five years, after the two dedicated freight corridors are operationalised and a lion’s share of freight trains move to the corridors, a lot of capacity will free up in the conventional railway lines for more passenger trains to run to cater to the demand. 
• Private train operators will bring with them the technical and managerial expertise which leads to optimum utilization of resources.
• The step is also expected to boost private investment in the sector
• It will also ease burden on government finances and helps reduce the loss of Indian Railways (because of under-recovery of cost due to low fares and hefty overheads)
• It will create the environment for enhanced service quality and user experience for the passengers

Way Ahead

Government needs to create an enabling ecosystem (policies, banking, infrastructure provision, regulation, ease of doing business) to tap the full potential of private players in railway sector.

Connecting the dots!

• Bibek Debroy Committee
• Should government insist on “Made in India” rakes for private players who wish to enter the sector? – Critically analyse