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Day 67 – Q 2. Do you support the idea of privatising the operations of railways? Substantiate your views with the help of suitable examples. 

  • IASbaba
  • August 26, 2020
  • 0
GS 3, Indian Economy, TLP-UPSC Mains Answer Writing
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2. Do you support the idea of privatising the operations of railways? Substantiate your views with the help of suitable examples. 

क्या आप रेलवे के संचालन के निजीकरण के विचार का समर्थन करते हैं? उपयुक्त उदाहरणों की सहायता से अपने विचारों को प्रतिस्थापित करें।

Demand of the question – Give your views with regards to privatising the operations of railways and also provide substantiation with suitable examples where you need to also give the other side of argument with proper substantiation.

Introduction

Recently, the Indian Railways initiated the process to allow private firms to operate passenger trains on its network through 151 new trains. While these trains will form a minuscule portion of the entire railway network, this marks the beginning of private sector participation in passenger train operations

Body

Supporting the idea of privatising the operations of railways, we can consider the following points:

  1. The railways has said that 70 per cent of the private trains will be manufactured in India which will be designed for a maximum speed of 160 kmph. There would be a reduction in journey time by around 10-15 per cent at 130 kmph and around 30 per cent at 160 kmph. This will help in both Make in India initiative as well as efficiency of transportation.
  2. The privatization will also help in accommodating the latest technology in railways coaches, safety and travelling experience. Thereby, it may help Indian Railways to become a world-class network.
  3. Niti Aayog’s strategy for New India @75 envisages many targets in railway infrastructure such as increasing the speed of infrastructure creation from the present 7 km/day to 19 km/day, 100% electrification of broad gauge track by 2022-23. Privatisation will help in this goal.
  4. The private sector’s success will depend critically on track operations and station access granted by the Railways. This will likely lead to insistence on clear operating procedures, responsibility allocation and high penalties for non-performance by the Railways.
  5. Track access charges will be the key to viability of operations. The Railways will need to transparently allocate its capital and operating costs for various activities to enable a clear determination of components of network costs. The process of transparent cost allocation will help highlight hidden inefficiencies, which can be addressed in the form of separate projects undertaken by the Railways.

When the railways are viewed as the transport of masses, privatisation becomes even trickier. It lends credence to views against privatising the operations of railways, which are discussed below:

  1. Increasing passenger trains will adversely affect freight trains where the latter actually accounts for 67% of Indian Railways’ earnings. Many experts opine that freight trains will get impacted as the country has limited lines on which we will see a higher number of trains running after this.
  2. Given that a private enterprise runs on profit, thus it may be assumed that the easiest way of accruing profits in Indian Railways would be to hike fares. This would render the service out of reach for lower income groups.
  3. An advantage of Indian Railways being government- owned is that it provides nation-wide connectivity to bring regional development. This would not be possible with privatisation since routes which are less popular may be neglected, thus having a negative impact on connectivity. For example, regions with rugged terrain and low population density like Himalayan states and North eastern states can be rendered inaccessible.
  4. Currently, the Ministry of Railways is effectively the policy maker, regulator and service provider. This, as the Bibek Debroy committee pointed out, is a clear conflict of interest and would undermine the fair competition between private and government railway operations and impede the efficient privatisation process of Indian Railways.
  5. Private companies are unpredictable in their dealings and do not share their governance secrets with the world at large. In such a scenario it would be difficult to pin the accountability on a particular entity, should there be a discrepancy.

Way Forward –

  • Modernization of Railways- There is a need to implement the recommendations of the Bibek Debroy committee, such as expansion of Indian Railways manufacturing company, Corporatization of core functions of railways, etc.
  • Sustainable Pricing- There is a need to revisit Indian Railways pricing model to make the passenger and freight segments sustainable. The tariffs should be competitive with the cost of road transportation.
  • Independent Regulator- Setting up an independent regulator will be critical for creating a level playing field for private players. In this pursuit, there is a need to expedite the process of establishing the Rail Development Authority, as it is already approved by the government.

Conclusion

With the success story of privatisation in the aviation industry to refer to, it may be wise to focus more on robustness of privatization in the world’s 4th largest rail network in the world by size to avoid pitfalls of other countries privatisation measures and instead ensure a world class transportation network for citizens of India.

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