Economics

Privatization of Railways in India

Background
The Indian Railways is moving towards total privatization as of 2017, seen in the light of the Centre's decision to auction 23 railway stations across India. This new move came as a part of the Public-Private Partnership (PPP) projects. The stations are to be allocated to the private firms through this auction, and the firms getting tender will be allowed to modernize the stations in their own ways. As part of this modernization of stations, the Railways will allow the developers to build malls, cinema halls, hotels, specialty hospitals and allow other kinds of constructions within the station premises.

Foreign countries such as the USA, Canada, Brazil, and UAE have a privatized railway system. Other nations such as the UK, Austria, Japan, Italy, and Germany have both private and government-operated railway networks.

The financial model for the redevelopment work has been framed in a way so that the government does not have to bear additional costs as the developer concerned would be maintaining the station for a minimum of 15 years. These firms would be granted leasing rights spanning 45 years for all commercial properties that would develop at these stations. The firms will also be allowed to maintain all station facilities such as power, platform maintenance, parking, food stalls, retiring rooms and so on.
Privatization of Railways in India
Stages of privatization
The redevelopment of the stations is to occur through many different phases.

•In the first phase, the responsibility of redevelopment has been given to the Indian Railway Station Development Corporation (IRSDC), which is a joint venture Company of Ircon International Limited and Rail Land Development Authority.

•In the second phase, 23 Railway stations will be auctioned, which will include Kanpur Central, Allahabad, Lokmanya Tilak, Pune, Thane, Visakhapatnam, Howrah, Kamakhya, Faridabad, Jammu Tawi, Udaipur City, Secunderabad, Vijayawada, Ranchi, Chennai Central, Kozhikode, Yesvantpur, Bangalore Cantt, Bhopal, Mumbai Central, Bandra Terminus, Borivali, and Indore.

Eyeing on Udaipur, Howrah, Indore, Secunderabad, Pune, and Faridabad railway stations, Malaysia’s state-owned Construction Industry Development Board (CIDB) is said to be participating in the auction and can prove to be one of the potentially big Foreign Direct Investment in the Indian Railways. According to the official reports from the Railways, apart from the CIDB, companies based in Korea and Japan have expressed their interest in the redevelopment project.

What do supporters of privatization have to say?
Through this project, the Indian Railways would be a fresh source of FDI. In 2014, India had allowed 100% FDI in railways infrastructure through automatic route. Through this benefit, foreign companies have established rail loco factories in Bihar with an investment of Rs 3500 crore.

The private participation in the Indian Railways indicates the implementation of the Bibek Debroy committee report, which favored private participation so as to increase the overall efficiency of the system. The committee had based the report on inferences drawn from the railway restructuring experiences from multiple countries, including Japan, the United Kingdom, Germany, Sweden, Australia, and the USA, as examples.

What are the views of the dissenters?
The Indian Railways moves over 2.3 crore people and 3 million tons of goods every day. The people who argue against privatization say that the common citizens of the country would experience a huge loss, as will the employees in the railways, including many pensioners, the Railways is a public utility which can become a profit-wielding commodity through privatization resulting in fee hikes.

Remarks of the Railway Minister
The former Union Minister of Railways, Suresh Prabhu had ruled out privatization of Indian Railways, however, of the Indian Railways can quite possibly be seen as a probability in the near future. He said that the bulk of the country still considered the Railways as an affordable and easy means of locomotion and privatization would greatly affect this section of the population. Prabhu also rejected a suggestion that in the future, the railways may no longer be a low-cost public mode of transport and might possibly become a privatized service.


Source: https://www.gs1india.org/content/indian-railways




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