Indian Railways: Should the government divest part of its ownership?

Indian Railways is witnessing delays in rail projects, mostly created by vested interests leading to increase in costs and corrupt practices

Indian Railways began their chugging career more than 150 years ago and have become one of the largest railroad networks in the world, with a turnover of over $17 billion (2011-12). It is government owned and employs the largest number of Indians in a single government enterprise, with a net work of over 115,000 kms. And it ferries 24 million passengers a day. Apart from extensively covering India, it has limited service to Nepal, Bangladesh and Pakistan.


Recently, the Indian Railways floated a tender for supply of 11728 wagons with the bid closing next week, on 25th November. It may be noted that the last tender called for supply of various types of wagons totalling 15,715, which brought some relief to the Wagon building industry in the country.


For the first time, the bidding this time has to be made in electronic format and the tender calls for supply for carrying cement bags with specific loading and unloading features. This was announced two months ago on 25th October.


In 2011-12, it was reported that the Railways carried 2.8 million tonnes of freight daily and now they are closer to reach 3 million tonnes. However, there is regular shortage of rakes for moving bulk cargo like coal, iron ore etc. In case of coal, in fact, the Railways, in order to ensure timely supply of coal to industries from pit heads to the manufacturers sidings, have also began to lay dedicated corridors in some areas to ensure collection and delivery. They move bulk supply of foodgrains as well, both of which are subject to wastage and pilferage, but these may occur at any point of time but the pity is that the Railways have not yet been able to come out with a pilfer proof wagon that can carry precious cargo.


Wagon builders have idle capacity in their constant search for various export opportunities and are supplying various types of wagons to the exacting international standards, to many countries.


Despite its huge net work and potential, there is no doubt, prima facie, that Railways are not run in an enterprising fashion to earn profits and act like many other successful government companies, some of which have huge and surplus cash reserves.


While Udhampur-Srinagar-Barmullah railway project started in 1955, estimated to cost Rs2,500 crore has run to a staggering Rs17,500 crore and still not completely finished. All these indicate the embodiment of inefficiency and poor responsibility shouldered by all concerned. Delays in project are created by vested interests leading to increase in costs and corrupt practices. Political agitations and terrorist activities across the border, as in the case of some of the affected areas, may be "treated" as force maejure conditions, on which the contractor has no control, but where such conditions do not exist, it is purely due to other reasons cited above.


Almost every of its project has cost over runs and delayed completion by several years, as a result. According to information available in the media some of the prominent projects, such as for the Kudankulam Power plant, approved in 2001 costing Rs4,099 crore eventually cost Rs13,171 crore; the oldest, said to be the Howrah-Apta-Champadanga line was estimated to cost around Rs34 crore reached Rs550 crore - the list is endless.


Another important factor that comes to our mind is the under-utilisation of track, which is not "in use" except for the short duration of time when the train passes through. We do not believe any study has been undertaken to utilise the capacity by increasing the passenger train or freight traffic.

Also, another peculiar phenomenon is the promises made Railway ministers to take care of their constituencies by either increasing or establishing new service and laying tracks for additional lines. Such acts appease their vote banks, in the short run.


So what is the solution to this perennial problem? It is time Government thinks seriously in terms of divesting its interest in Railway ownership by introducing sectional "ownership" by corporate bodies to run certain service operations. It could be from the major city to the point of tourist attraction and once the returns are satisfactory, the idea could be expanded.


If other countries can permit privately operated railroad systems, why not India think on these lines and even come out with an innovative plan?


(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)

Jerin Chacko
1 decade ago
Right now, the Railways is so ungainly, it is difficult for the head to control the limbs.
1 decade ago
I strongly disagree with the author. We are already suffering since private bus operators have been allowed to run besides state owned transport corporations. Although the service is better and state owned transport corporations are not well run, private operators miss no chance to jack up prices in festival seasons. Public transport corporations despite bleeding in losses make sure that all areas of state / city are covered where as private operators run only on high volume routes. As things stand now, rail travel is the cheapest form of transport.

In fact metro rail should be quoted as an example here. No doubt their service is good and they are maintained well. But under the guise of PPP how much of public land has been acquired? Many metro rail divisions despite being under RTI delay their responses. In Hyderabad, it has been reported that the promoter of HMR, plans to build malls and hotel on the land alloted for metro. They cleverly drafted the contract to allow them to use the land as they deemed fit.

We will simply be repeating the sins of what we did to BSNL, Air India etc.
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