Adoption of the PPP model by the Indian Railways


The introduction of PPP in Railways is a welcome step and can lead to the kind of reforms that can help transform India and make it a global leader.
The broad contours of the Indian Railways’ proposal feature a list of 109 pairs of routes through 151 trains (rakes), divided into clusters with at least 12 rakes to be operated.
Spanning an extraordinary 68,000 route km, the Indian Railways is truly the pulse of the nation. It employs over 1.2 mn people and generates approximately Rs 2 lakh cr annually—a major contributor to jobs, GDP, and mobility. In fact, efficient and optimal use of the railways could further add up to 1% to GDP according to Amitabh Kant, CEO of Niti Ayog
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The robustness of passenger demand is unprecedented as it has withstood long-term modal shifts and consistently reported unserved demand levels of 15%, in the form of waitlisted passengers. The unmet demand level necessitates substantial investments in capacity augmentation and technology.
The time has come to modernise the Indian Railways, make it world-class, and a key driver of the country’s growth in the post-Covid era. The overall travel experience of the common man needs to be transformed; high-quality in-transit experience needs to be supplemented by best-in-class railway stations.
However, to undertake an operation of such gargantuan proportions, India must involve the best resources via PPP to bring in the latest technology, leading practices, and efficiencies.
The recent opening of PPP opportunities by Indian Railways is a clear indicator that a reform-driven agenda is being implemented. It is a controlled foray into PPP, where market forces will help enhance the quality of services and in-transit experience, without the government relinquishing control over public safety and security.
The broad contours of the Indian Railways’ proposal feature a list of 109 pairs of routes through 151 trains (rakes), divided into clusters with at least 12 rakes to be operated. Journey time will be, within a range of 10%, like the fastest Indian Railways train on that path. Proposed routes include Delhi–Mumbai, Delhi–Chennai, Mumbai–Chennai, and others. This is a follow up of last year’s launch of the IRCTC-run Tejas Express, and the Kashi Mahakal Express. Once the ecosystem is evolved, the model could be replicated on many more routes in future. For routes that may not be attractive for private operators, upfront fares may be prescribed, and gap funding be structured to bring in viability.
PPP operators are expected to finance, procure, operate, and maintain the allocated trains. To make the current packages a viable business model, the railways has created a composite haulage charge mechanism to access common infrastructure such as track, signalling, and terminals, among others. The haulage charge, specified upfront in the agreement, will be payable monthly upon commencement of operations. This could generate revenues that will offset expenses towards infrastructure maintenance of private trains.
The reforms driven agenda makes one thing clear – it’s time to modernise the Indian Railways and make it world-class.
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