Print Friendly, PDF & Email





NITI Aayog and Indian Railways have come out with a discussion paper for running 150 trains on 100 routes by private operators. The recommendations of the high powered committee envisaging an investment of 22500 crore rupees have been put in public domain for stakeholder consultations. The 100 identified routes which include Mumbai Central – New Delhi , Patna – New Delhi , Howrah- Chennai and Lucknow- Jammu Tawi etc. have been split in to 10-12 clusters. As per the report the private operator will have the right to collect market linked fares and will be provided flexibility of class composition and halts. The aim for this ove is said to ensure world class service experience to passengers , reduce supply demand deficit and introduce modern technology

Benefits of private investment in Railways:

  • Opens opportunity for returns from investment in Rail Projects.
  • Improved Infrastructure – It will lead to better infrastructure which in turn would lead to improved amenities for travelers.
  • People’s expectation has changed and we need to cope up with those so private investment is the way for providing higher services.
  • Lesser Accidents –  Because private ownership is synonymous with better maintenance, supporters of privatisation feel that it will reduce the number of accidents, thus resulting in safe travel and higher monetary savings in the long run.
  • Rails will remain the same, the signaling will remain the same butt interface with public and rolling stock have a substancial change.
  • Augmentation of railway infrastructure and decongestion of the railways.
  • Ensure timely availability of Rail Infrastructure to the beneficiaries viz. Port, Industry and States.
  • Better maintenance and efficiency in implementation of projects.
  • It leads to simplification of cost recovery for the money spent by the government in setting up the infrastructure. It would be profitable as the government would charge the operator
  • The move would foster competition and hence lead to overall betterment in the quality of services.


  • Absence of independent regulator in the railway sector. In the absence there are chances of litigation or other issues as cropped up in the road sector.
  • Government has water, river, health and education to look for and therefore limited finance available for railways.
  • Coverage Limited to Lucrative Sectors: An advantage of Indian Railways being government- owned is that it provides nation-wide connectivity irrespective of profit. This would not be possible with privatisation since routes which are less popular will be eliminated, thus having a negative impact on connectivity. It will also render some parts of the country virtually inaccessible and omit them from the process of development.
  • No past experience in the PPP model for the implementation of projects for railways.
  • Fares: Given that a private enterprise runs on profit, it is but natural to assume that the easiest way of accruing profits in Indian Railways would be to hike fares, thus rendering the service out of reach for lower income groups.
  • Trade Unions.
  • Affects socio-economic development: This will defeat the entire purpose of the system which is meant to serve the entire population of the country irrespective of the level of income
  • Accountability: 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:

  • Privatisation of railways operations will require a new institutional framework where infrastructure will remain as a government’s monopoly while thewre would be a market of service providers.
  • It is important to modernize the railways, so measures must be taken to reimburse the social costs speedily so that resources of the railways is better allocated and facilities are upgraded from time to time.
  • Core Railways functions can be Corporatized rather than privatized.
  • Corporatization refers to the restructuring or transformation of a state-owned asset or organization into a corporation. These organizations typically have a board of directors, management, and shareholders.
  • However, unlike publicly traded companies, the government is the company’s only shareholder, and the shares in the company are not publicly traded.
  • The peripheral function of railways (cleanliness, ticket disposal, traveller’s amenities), must be privatized