Railways mulls inviting Private Firms to run Trains on some routes; IRCTC to operate two trains on trial basis!

Getting on a private track! Most economists believe that modernisation and commercialisation of the Indian Railways are essential.

NEW DELHI: Indian Railways is planning to get private firms onboard to run passenger trains on some low congestion and tourist routes. Bids for the same will be invited in the next 100 days. It may be noted that railways has also proposed to corporatise units manufacturing coaches and other rolling stock. The government is seriously exploring a plan to induct private operators to run passenger trains on low congestion and tourist routes and will invite bids in the next 100 days, a Railway Board document shows.

To begin with, the railways will experiment by offering two trains to its tourism and ticketing arm, IRCTC, to operate. The ticketing and on board services will be provided by IRCTC and the railways will receive a lump sum amount in return. These trains will be run on routes which have “low congestion and connect important tourist spots”, which will be identified by the national transporter. These will run on the routes like Golden Quadrilateral and connecting major cities. The custody of rakes will be transferred to IRCTC, which will pay annual lease charges to the railways financing arm, IRFC.

Subsequently, the railways will float the expression of interests “to identify operators willing to participate in the bidding process for rights to run passenger day/overnight train sets connecting important cities,” a communication sent by Railway Board Chairman Vinod Kumar Yadav to all members and top officials of railways on Tuesday said.

The letter said that the railways will consult trade unions while finalising the contours of inviting private players to run passenger trains on select routes.

If the pilot project is successful, railways will float expression of interest (EoI) ‘to identify operators willing to participate in the bidding process for rights to passenger day/overnight train sets connecting important cities”. As per the national daily report, the national transporter will consult trade unions before finalising everything and inviting private players.

The railways will also launch a massive campaign urging people to give up the subsidy while booking or purchasing a rail ticket. The passengers will have the option to purchase ticket with or without subsidy.

The proposed campaign asking people to give up railway ticket subsidy will be on the lines of the Ujjwala campaign where people were urged to forgo the subsidy for LPG cylinders. According to the Railways, it recovers only 53% of the cost incurred from passenger transport business.

Among other plans, the railways also proposes to corporatise units manufacturing coaches and other rolling stock. There are seven production units across the country. The proposal says that the production units, including associate workshops, will be hived off into a government-owned new entity “Indian Railways Rolling Stock Company”. Each production unit with a Chief Executive Officer will function as an individual profit centre, report to the board or chairman-cum-managing director of the new entity.

The railways will immediately start consultations with unions and come up with a Cabinet note for approval for at least one production unit to begin with, and it might be the Modern Coach factory in Rae Bareli.

The report further mentioned that railways has also proposed to corporatise units manufacturing coaches. According to the proposal, the production units, including associate workshops, will be hived off into a new government-owned entity “Indian Railways Rolling Stock Company”.

India spent the past five years contemplating ways to set up a holding company for the Indian Railways and make all its public sector undertakings (PSUs) its subsidiaries. This requires several reforms proposed by the NDA regime to take shape, but since the initial step of merging the railways budget with the country’s general budget, the NDA has developed cold feet. At present, the ministry of railways is a separate entity, but most experts believe that India, like most countries, must have a single transport ministry at the Union level. This would bring flexibility and efficiency, commercially and operationally. This step could, however, upset the unions, who see this as a backdoor entry for private players and a threat to their jobs.

Now, a big infrastructure push for dedicated freight corridors (DFCs) is being made, which would allow segregation of slow-moving freight from mail and express trains. The rolling stock and locomotives are being replaced with more efficient and modern versions and administrative reforms-restructuring of the railway board, decentralisation of decision-making-has started taking shape. The new government is in a much better position to push this reform of turning the railways into a PSU, allowing an increase in private investments in this sector.

In the past two decades, reports by panels led by eminent economists and technocrats, like Bibek Debroy, Rakesh Mohan and Sam Pitroda, have pointed to the modernisation and commercialisation of the railways.

In 2013, the challenges faced by China in this sector were identical to India’s, but changes have been slow compared to our neighbour’s progress. In India, the railways is also bound by the social obligations of providing a cheap transportation for the poor.

In 2017, the cabinet approved the formation of a Railway Development Authority to level the playing field for private investors to step in. If the new government wants to encourage private players to own locomotives and run commercially viable passenger and freight travel, the railways is required to make its PSUs its subsidiaries. This is a big task for the new government, but doable.

The 100-day plan


  • Movement of freight (24 km/ hr) and passenger (50 km/ hr) trains among the slowest compared to peer countries
  • Indian freight fares are among the costliest globally, while the passenger fare is the cheapest
  • The railways is unable to increase revenues to match expenditure. The operating ratio has remained above 90 per cent for many years.


  • Appointment of a Railway Development Authority will allow price regulation of both freight and passenger trains
  • Setting up of Indian Railways Rolling Stock Company Ltd.
  • Opening up to private investment, to allow ownership and operations of freight terminals
  • More ‘Vande Mataram’ coaches to replace premium trains
  • More DFCs by 2019 end and more bullet trains are expected