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India
12 Apr 2017

Railways will allow firms to run private freight trains

After hitting a record high in terms of profit Indian Railways' recently devised step will disrupt its monopoly in the transportation sector.

Indian Railways will soon allow private companies to run their own freight trains from private terminals.

This move, if successful, may lead to Railways allowing private firms in having their own passengers' trains in near future.

In context

Indian Railways forgoes monopoly to woo investors
Industry heavyweights have already shown interest

New scheme

Industry heavyweights have already shown interest

Private players in sectors such as hardware, auto, logistics, grains and chemicals have expressed interest in owning freight trains in the past.

Railways will now allow them to "invest in their own terminals at their plants or any other convenient location" and have their own trains.

Majors like Tata Steel, Adani Agro, Kribhco are among the few, who already have their own private terminals.

Revenue

This may become a major money spinner for Railways

Under the new scheme, private companies will lease rakes from Indian Railways or manufacture their own rakes and run them as per their own convenience.

The operation will be managed by Railways and firms will have to pay track and other usage charges to them.

As of now Railways has decided to allow 55 private freight terminals at an investment of Rs. 5,000 crore.

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All part of the bigger picture

Target

All part of the bigger picture

Railways posted an all-time high revenue in FY 17 and have outperformed their loading target. Suresh Prabhu is now gearing up to achieve the next target of 1,200 million tonnes.

Private terminals would add at least 20-25 million tonnes of additional loading capacity and will also bring added revenue to the railways, making it a win-win situation.

Report

Following up on Debroy committee advice

Set up in 2015 to restructure the Railway Board, the Bibek Debroy Committee favoured privatization of wagons and coaches.

Debroy said, "The key lesson from the UK is to retain the rail-track and infrastructure as a publicly-owned monopoly while opening up rolling stock operations for passengers and freight to the private sector."

Although, Railways didn't implement it then but is eventually rolling it out.

Railways once solicited overseas investments

Invite

Railways once solicited overseas investments

In 2016, Railways had given an invitation to foreign private companies to invest in a new fleet of high-speed trains, which is still under development.

This move was a part of PM Modi's vision of taking Indian Railways to the age of high-speed trains and the government had proposed to take over the Maglev technique for high-speed trains on a public-private partnership (PPP) method.

To the moon and back

The total distance covered by the 14,300 trains on the Indian Railways every day is equal to three and a half times of the distance between Earth and Moon; in addition these trains carry 23 million passengers and 1.3 million tonnes of freight every day.

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