After the lukewarm response to its first set of tenders for private trains and criticism from the industry about the structure of the tender, the Ministry of Railways is now working to roll out a new set of tenders by February next year.
“The Railway Board is working with private players and other industry experts in order to come up with the new set of tenders for private train operations in the country and we are looking to come out with the tenders by next year,” a senior government official said, adding that the tenders should be floated by February.
Officials from the Railway Ministry say that they will look to address all the previous concerns of the industry through the new tenders.
Sweetening the deal
The Railway Board is also considering reducing haulage charges for private train operators after a certain period.
The Ministry is also considering incentives for private train operators if they use locally made coaches and engines.
“A proposal is being considered where private train operators will either be given tax rebates or a subsidy to use locally made coaches and engines on the trains they want to operate,” as per a senior government official.
Tepid response
In August, the Ministry had put on hold the tender for 151 private trains along 109 major routes at an estimated investment of Rs 30,000 crore due to poor participation by private firms.
Senior officials from Indian Railway Catering & Tourism Corporation (IRCTC) also said that they are in touch with the Indian Railways (IR) about the tenders for private trains and will participate in the tender when the ministry comes out with the new contracts.
IRCTC officials said that they are consulting with the Ministry of Railways in order to reduce the bottlenecks that existed in the tenders to operate private trains the first time around.
Last year, on July 1, IR had begun the formal process of allowing private trains on 109 routes — a process that aimed to, for the first time, open one of the government’s most prominent enterprises. The national transporter planned to introduce private trains on its network in phases, with the first dozen due to start running in the 2023-24 financial year and all 151 by 2027.
However, only two bidders, IRCTC and Megha Engineering & Infrastructures, evinced interest at the financial bidding stage. This, officials said, raised questions on the purpose of running trains via private players.
Competitor and regulator
The biggest concern for the industry was the lack of a regulator for Railway operations.
“Indian Railways cannot be both a competitor and a regulator. There is, no doubt, a need for a technical regulator. Even though the railways kept emphasizing fair regulation, there has to be a contractual commitment for a project to be financed,” a senior official from a potential bidder had told.
Industry participants also expect IR to ease the terms of the revenue-sharing agreement in the bidding norms, in order to avoid monopolization of passenger traffic and routes.
Furthermore, market experts said that in order to make private train operations more attractive, the government should follow the route taken in the aviation sector and de-regulate the market, opening it up to private players.
“The government, instead of bidding out-train operations on particular routes, can even look to bid out slots and timing to private players. This will certainly increase participation from the industry,” said a market expert from Goldman Sachs.
He added that there is currently a lot of skepticism around operating private trains as not many companies have evinced interest. Also, the COVID-19 pandemic has hit the financial matrices of many companies.
Rs 30,000 crore investment projection
According to the ministry, the planned investment was estimated at around Rs 30,000 crore, and a majority of the rakes (70 percent) would have to be manufactured in India; private entities cleared to run the train services shall be responsible for financing, procuring, operating and maintaining the trains. The winning bidders were to be provided a concession period of 35 years on revenue. According to the ministry’s projections, IR was supposed to select the companies that will run the private trains by April 2021. The first 12 were expected to start plying by 2023-24, followed by 45 more in FY 2024-25, 50 in FY 2025-26, and the last 44 by 2026-27.
