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Bumper move! Get ready for world-class private trains; Indian Railways moves closer to leasing out 100 routes

Devanjana Nag
private trains

As part of its plan to lease out a minimum of 100 routes to private operators to run as many as 150 passenger trains, the Modi government is all set to invite investments worth about Rs 22,500 crore in rolling stock. The proposal is scheduled to be taken up next week at this month's sitting of the Public Private Partnership Appraisal Committee (PPPAC), according to an IE report. Following the intervention of the Empowered Group of Secretaries, which is chaired by Amitabh Kant- the NITI CEO, the Railway Board finalised the proposal after deciding on how to bring in private investment to operate passenger trains.

According to sources quoted in the report, the biggest point of contention is the amount the national transporter would charge private players as "haulage charge" or track-access charge. It is learnt that one section of policymakers have favoured keeping the haulage charge low to make the business model attractive, while the other section has internally expressed that this might not be in the best interests of Indian Railways financially.

According to the report, it is being expected by Indian Railways that the bidders will include tour operators, travel firms, rolling stock companies, companies working in the rail sector and airline operators. Each of the private entities will be allowed to bid for at least 12 trains and a maximum of 30 trains in order to ensure competition. Also, it has been reported that each private train will consist of at least 16 world-class standard coaches. The companies could lease the rolling stock if they do not own it, the report added.

According to the report, the first "private train" of the country, Lucknow-Delhi Tejas Express by IRCTC, enjoys some concessions as it is a government enterprise and a part of trying a new business model. The other section of policymakers, who are warning of Indian Railways finances, is of the view that the same arrangement cannot be offered to private operators. Since the national transporter maintains its books through cost accounting system that is fully-distributed, getting an exact cost of running trains is problematic, according to sources.

The private entities will bid on the basis of their Gross Revenue Share (fare as well as non-fare) - or the revenue amount they will share with Indian Railways- which could be over and above the haulage charges they pay, the report said.

Under the current proposal, the haulage charges will consist of the cost of using railway terminals, physical transportation of the train, the traction cost (electricity), track maintenance, signalling as well as overheads at the rate of around 25%. According to the sources, there have been discussions on whether the rate of 25% is appropriate from a business model point of view or not. The private operators would be able to transport parcels or goods on their trains and can also decide their own fares as well as stoppages.

As per the plan, the train routes would be given out to private players for nearly 35 years, each of whom has to have net worth of at least an amount of Rs 450 crore along with the business or investments in infrastructure of Indian Railways worth around a sum of Rs 2,700 crore in the last five years. In terms of rake numbers, a total of 150 trains represent around 5% of total passenger operation capacity of the national transporter.