Privatization of Indian Railways  - An Overview

Indian Railway is a behemoth that gives employment to more than 12 lakh people. It helps in connecting people to every corner of India. To help improve the services given by Indian Railways, the Government of India has been contemplating privatization. This article briefly throws light on the decision of the Ministry of Railways to privatize railways.

Latest context related to Privatization of Indian railways  

Recently, Railways Minister Piyush Goyal asserted that Indian Railways will never be privatized but private investment should be encouraged for more efficient functioning. The railways have been putting an enormous focus on passenger safety. The country can progress towards high growth and create more employment opportunities only when the public and private sectors work together.

Indian Economy is an important segment of the IAS Exam, and aspiring civil services candidates need to have a good understanding of the concepts of privatization, liberalization etc.

To complement your preparation for UPSC 2023, check the following links:

Privatization of Railways – UPSC Notes:- Download PDF Here

Privatization of Railways – Recent Decision of Ministry of Railways

  1. On July 1, 2020, the Ministry of Railways announced that 151 trains in 109 pairs of routes will be operated by private sectors. It comprises just 5% of the 2,800 Express and Mail services operated by Indian Railways.
  2. Private trains will start operating tentatively in 2023 and in 12 clusters.
  3. Investments from the private sector are expected to the tune of Rs 30,000 crores.
  4. Private companies will be given the freedom to procure locomotives and trains from their source of choice.
  5. All the employees operating the train will be private employees. However, the loco pilot and the guard will be the employees of Railways.
  6. Once the trains are operated by private players, then similar to the airline’s industry, railway passengers will have to pay extra for extra baggage, preferred seating, on-board services, etc.
  7. Railways has invited Request for Qualifications proposals, for scrutiny of vendor capabilities, from those who can bring modern trains for operations on existing rail infrastructure. 

Indian Railways – Brief Introduction

  1. In 2018 India had 68,443 route kilometres of railways as per data available with the World Bank.
  2. In the fiscal year ending March 2019, Indian Railways carried 844 crores (8.44 billion) passengers and transported 123 crores (1.23 billion) tonnes of freight.
  3. India is among the World’s four largest rail networks, along with Russia, United States, and China.
  4. Indian railways operate not only passenger and freight trains but also operates schools and hospitals.
  5. Indian Railways is a major shareholder in 16 public sector undertakings (PSU) and other organizations that are related to rail transport in India.
  6. As of 1 April 2020, Indian Railways has electrified 58.49% or 39,866 km (24,772 mi) of the total route kilometers.
  7. India has a railway link with Bangladesh, Bhutan, Nepal, Pakistan.

Candidates can check the relevant links provided below to prepare comprehensively for the upcoming UPSC Civil Services Exams-

Indian Railways: Establishment and Brief Facts  Railway Zones and Headquarters in India
Changing Indian Railways: RSTV National Rail Plan (NRP)
Luxury Trains of India – Maharaja Express Dedicated Freight Corridors (DFC)
Talgo Train – Features, Advantages and Design The Railway Protection Force (RPF)
Operation Meri Saheli – An Indian Railways Initiative Can compensating loss-making routes change railway fortunes?
New Metro Rail Policy Government schemes

Privatization of Railways – Background

  1. The background behind the current decision of the Government is, the expert panel chaired by Bibek Debroy constituted by the Ministry of Railways.
  2. It had recommended that the way forward for the railways was “liberalisation and not privatisation” to improve services and encourage growth.

Aspirants can go through the difference between Globalization and Liberalization on the given link.

Privatization of Railways – What is the Need?

  1. Once the railways permit private players, there is scope for capacity augmentation. This is a very pertinent point because, in 2018-19, 8.85 crore people were on the waiting list and railways was able to provide reservation to only 16% of the waiting list passengers. 
  2. The Railway Board says five crore intending passengers could not be accommodated during 2019-20. Travel demand was in excess of supply during festival and summer seasons. The demand exceeded the capacity of railways.  
  3. The main objective of this move is to introduce a new train travel experience for passengers who are used to traveling by aircraft and air-conditioned buses.
  4. Cleanliness in trains, quality of food could be addressed with privatization.
  5. Time is precious, and the punctuality of trains needs to be improved.
  6. With the infusion of more funds through the private sector, there is scope for bringing in more technology thereby increasing the safety and comfort aspects of trains.

Candidates must read in detail about the Public-Private Partnership (PPP) on the linked page.

Privatization of Railways – Criticisms

  1. From some quarters there is criticism that railways are the common mode of transportation for common man, hence they will face the brunt of price rise in the railway’s ticket fares.
  2. There is criticism that the move to privatise railways will affect the job opportunities of people belonging to the economically and socially backward class.
  3. Many trade unions like AITUC, HMS, CITU and independent federations like AIDEF and AIBEA opposed the decision of the government.
  4. Private players may find it difficult to compete due to various complex factors.

Way Forward with Privatization of Indian Railways

  1. 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.
  2. Sustainable Pricing: There is a need to revisit the Indian Railways pricing model to make the passenger and freight segments sustainable. The tariffs should be competitive with the cost of road transportation.
  3. Modernization of Railways: There is a need to implement the recommendations of the Bibek Debroy committee, such as the expansion of Indian Railways manufacturing company, Corporatization of core functions of railways, etc.

Privatization of Railways – UPSC Notes:- Download PDF Here

Relevant Links

Mumbai to Ahmedabad High-Speed Rail (MAHSR) Disinvestment Policy in India and DIPAM
Topic-Wise GS 3 Questions for UPSC Mains Economic Mains Questions for UPSC GS-3
UPSC Mains General Studies Paper-III Strategy, Syllabus & Structure Economic Reforms Of 1991
Setu Bharatam Project Science & Technology Notes For UPSC 

UPSC 2021


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