Indian Railways to make private train operations more lucrative

Indian Railways has recently decided to delink the cost of energy that is consumed by the private trains from the overall haulage charges that will be payable to Indian Railways. This is being done to make the train running business more viable for private operators in the future, according to a report.

In the coming months, the private players are likely to run 150 trains on 100 identified Indian Railways’ routes. According to the report, it has been decided that if private players bring in modern trains that display the actual amount of consumed energy, the haulage charge will reduce to approximately Rs 512 per km, much below the Rs 668 per km (which includes the energy cost) that has been set for the private entities.

The modern trains that display the actual amount of consumed energy are in vogue across the world, but this feature is not reliably available in Indian Railways’ train systems. The policymakers, however, have decided that delinking cost of energy leaves an elbow room for the private companies to bring in trainsets that are energy-efficient. This could be different for each private player depending on the rolling stock type being used.

Under NITI Aayog CEO Amitabh Kant, the Empowered Group of Secretaries has decided to “define” item-wise what non-fare revenue would include for the private companies. For private players, this makes the business model even more lucrative. In the new business model, private companies will be bidding based on their gross revenue that they are willing to share with the national transporter, over and above the haulage charge payable to operate the trains.

According to the latest round of discussions, everything that the operators of private trains can make money from will be a part of the gross revenue that they will have to share with Indian Railways such as luggage space, seat preference, parcel, branding of all kinds, onboard facilities like entertainment, WiFi. The gross revenue is in addition to the money made from sale of tickets.

Since the move is being tried for the first time in the rail sector in India, policymakers want to make the contract watertight from the point of view of Indian Railways. The private consultant which is advising Indian Railways on this project has been asked to draw up the nitty-gritty of the inclusions of non-fare revenue to be made part of the RFQ document. To roll out the first set of trains after trials on Indian track conditions, the winning bidders will get nearly two years. So far, many big firms like Tata Realty, the Essel Group, Adani Ports and SEZ, IRCTC and others have shown interest in bidding for the routes to run private trains.

The idea behind allowing private companies to run passenger trains is that when the upcoming Dedicated Freight Corridors (DFCs) take away at least 70% of freight trains traffic, the conventional network will have a lot of capacity. Thus, to meet the huge demand for more trains without spending on investments, Railways intends to bring in private sector to share some of that burden, the report said. The move is to try and present a lucrative business proposition for the private companies to enter the segment and invest for the long term, it added.