Recent calls for privatisation of Indian Railways aim to address inefficiencies, outdated infrastructure, and high operating costs

Privatisation under PV Narasimha Rao

• Economic Reform (1992): The Indian economy underwent a transformational reform under Prime Minister PV Narasimha Rao in 1992.
• Privatization: A stagnating economy burdened by inefficient public sector institutions was liberalised through systematic privatisation.
• End of License Raj: The infamous License Raj came to an end, ushering in a new era of economic freedom. 
• Criticism:  Although criticisms exist about the slow pace of privatisation, the benefits are undeniable — for instance, the transformation of airports post-privatisation.

Challenges Associated with Indian Railways

• Lack of Transformation: Despite liberalisation elsewhere, Indian Railways remains frozen in a time warp.  
  • Except for a few modern developments like the Vande Bharat trains and renovated railway stations, the majority of Indian trains still mirror conditions from the 1970s or earlier.
• Monopoly: Indian Railways continues to enjoy an absolute monopoly, unmatched by any other sector in India. The absence of real competition has led to stagnation and inefficiency.
• Outdated Stations and Overcrowding: Typical scenes at railway stations reflect an era of black and white films ,  flickering lights, families crowded together, and a lack of order and safety.
• Delays: Frequent delays, overcrowded coaches, and outdated facilities dominate the experience.  Resilience of the network is near a breaking point.
• Ticketless Travel: Obtaining a reserved seat on major routes has become nearly impossible. Even with a ticket, there is no guarantee of seat availability, and ticketless travel has become the norm.
• Alarming Operating Ratio: The operating ratio — the percentage of revenue spent on operations — is unsustainably high. As of 2024, the operating ratio stood at 98.43%, meaning Indian Railways spends over ₹98 for every ₹100 earned.
• Subsidies: Indian Railways recover only about 57% of operating costs through ticket sales. Passenger trains run at a substantial loss, with freight charges used to cross-subsidise passenger services.
• Shift Towards Road Transport: Due to exorbitant freight costs, road transport has become the preferred mode for goods movement, further undermining railways’ revenues.
• Outdated Infrastructure: Accidents frequently occur due to outdated tracks and obsolete equipment, raising serious safety concerns.
• Wastage of Prime Real Estate: Indian Railways, steeped in British-era traditions, continues to underutilise premium real estate across Indian towns and cities.
  • Most of this valuable land is occupied by bungalows, schools, and quarters for railway staff rather than being used productively.

Concerns Regarding Privatisation

• Higher Costs: The introduction of private operators raises legitimate fears —
  mainly about higher costs and reduced access for the economically disadvantaged.
• Balancing Modernisation with Tradition: However, modernisation need not mean abandoning tradition. A well-structured privatisation strategy can blend innovation with the heritage ethos of Indian Railways.
• Aviation Sector Experience: The liberalisation of India’s aviation sector in the early 2000s provides important insights:
  • Proliferation of private airlines
    
  • Improved service quality
  • Better operational efficiency and connectivity
•  Later Success: Though initial resistance existed, privatisation led to lower fares and enhanced connectivity —  despite the later emergence of monopolies in airport operations and airlines.

Way Forward

• Recommendations for Modernisation: Commission reports like those of the Bibek Debroy Committee have consistently called for restructuring operational frameworks, increasing private sector investment and modernising infrastructure.
• New Infrastructure Model: It is high time that railway lines and stations are treated like National Highways —  where the government owns the infrastructure, and private and public sector operators pay toll taxes to operate on it.
• Catalyst: The introduction of bullet trains presents a golden opportunity for Indian Railways to leap into modernisation. Fast, efficient alternatives could redefine travel for an evolving Indian economy.
• Strong Regulatory Framework: A well-defined regulatory framework can ensure accountability to safety standards and drive innovation while safeguarding public interest
• Immense Scale: Indian Railways carries nearly 67 crore passengers annually —
  a scale that can attract private and multinational investment if handled smartly.
• Learning from China’s Model: China’s railway reforms offer valuable lessons like separation of non-core functions and creation of a world-class network

Conclusion

Incremental changes are no longer sufficient if India aspires to catch up with China’s standards in the next five decades. A serious structural transformation, led by private sector participation and strong governance, is the need of the hour.

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