July 26, 2020

Rumble on Railway Tracks: Why Privatise Indian Railways?

Arindam Chandra

THE media is agog with stories about rail privatisation. The ministry of railways has sought private players’ request for qualification for 151 trains running on 109 rail routes. Howrah-Delhi, Howrah-Chennai, Howrah-Mumbai and Delhi-Mumbai are among the routes to be privatised. The lifelines of Mumbai and Kolkata, the suburban trains, will also be given to private entities. Meanwhile, the first-ever “private” rail, Tejas Express, has just started chugging between Delhi and Lucknow, with liveried attendants and a host of passenger friendly amenities including a late running charge to be credited to a passenger’s wallet. To quote the Financial Express, dated October 10, 2019, the Narendra Modi government was in the process of forming a task force to draw a blueprint for handing over operations of as many as 150 trains and a total of 50 railway stations to private operators. The Indian Railways (IR) trains and railway stations are likely to be handed over to private players in a time-bound manner. According to a PTI report, a letter sent by Niti Aayog CEO Amitabh Kant to railway board chairman V K Yadav states that an empowered group will be constituted in order to drive the process. Other than Yadav and Kant, the secretary of department of economic affairs and the secretary of the ministry of housing and urban affairs will be part of the empowered group, the report said.

A few years ago, the Bibek Debroy Committee (officially known as the Committee for Mobilization of Resources for Major Railway Projects and Restructuring of Railway Ministry and Railway Board), formed in September 2014, eulogised privatisation. In its final report in June 2015, the committee says, “It needs to be understood that this committee does not recommend privatisation of IR. It does, however, endorse private entry. This committee prefers use of the word “Liberalisation” and not privatisation or deregulation, as both the latter are apt to misinterpretation.” Showing fiscal constraint as the prime mover, it advocates private entry in railway infrastructure, manufacturing and maintaining wagons and locomotives, ticket sales and inspection, running and maintaining rail routes and so on. In the name of accountability and transparency of railway accounting system, all activities are to be decentralised to the core and profit-making activities/operations would be handed over to private entries while the social responsibilities and loss-making operations will be kept in the books of the public sector. The report also suggests private entries be given subsidies for choosing activities that are not cherry picked. If a Zee News report on October 7, 2019 is to be believed we may soon see SpiceJet, Indigo or Makemytrip running Indian railway trains. The railway ministry, the report suggests, “is going ahead with the idea aggressively”. The ongoing scheme of things of encouraging private entities dates back to the beginning of the 1990s when India started to become India Inc. The policy of liberalisation, globalisation and privatisation requires underinvestment in public sector, thereby making them function weakly and consequently selling or leasing them out to private capital in the name of bringing in efficiency. In case of Indian railway, the response has been lukewarm. So the grand plan is being finalised for ushering in private capital through another door. While the central government shifted a major portion of the railway budget to PSU life insurer, LIC of India (a whopping Rs 1,50,000 crore in five years) for IR’s infrastructure development (Indian Railways Finance Corporation / IRFC) that has a long gestation period of returns, the quick earning profits would be shared by the private players. Besides, the government subsidises the rich in the name of corporate tax waiver, excise and customs duty concessions and revenue foregone on direct taxes. So, the logic of financial constraint is a sham. Further, the policy decision of privatisation will deteriorate the financial health of the railways that may badly impact, inter alia, its investors, chiefly LIC among others.

Capitalisation rode on the steam engine that drove railways for its growth story all over the world. It revolutionised transport and expanded markets by augmenting demand. In India, it was a different story. The British rulers engaged their private finance with lucrative offers of returns. While everything from the engines to the fish plates were brought from their home, thereby developing their own industries the return on investment was drained from India’s poor people. Bipan Chandra quotes R C Dutta (The Rise and Growth of Economic Nationalism in India p.202) that “there was an extravagance in the construction of lines…perhaps unexampled in the history of railway enterprise in any other country.” After the Second World War, the global capital advocated railways' natural monopoly. Monolithic, State owned entities were formed that took care for the entire rail ecosystem – infrastructure, transportation and train services. Keeping in view the broader social and economic responsibilities, State intervention was felt to be sacrosanct. The British Railways was formed in 1948 from the nationalisation of the “Big Four” British railway companies. In 1951, all the existing companies like Great India Peninsular Railway, Bengal railway etc were nationalised to form Indian Railways. State owned railways have been successfully meeting their objectives. However, with the advent of market driven policies, things began changing in favour of private monopoly capital.

The present method of privatisation of Indian Railways is modeled on the British rail privatisation. The government led by Margaret Thatcher, elected in 1979, sold off various State-owned businesses including Sealink ferries, British Transport Hotels, Traveller’s Fare Catering and British Rail Engineering, all four related to the British Rail. The logic was same – the government, to them, had little business in running business. The method was simple – break and sale, even though till the early 1990s the rail network was investment-starved but effective at controlling costs. It was under Thatcher’s successor John Major that used the Railways Act 1993 to dismantle the entire rail ecosystem. To quote an article published in Aspects of India’s Economy, Volume 62, on rail privatisation in the UK since the mid-1990s: “After privatisation, the British Railways have been subjected to extreme fragmentation ( with an estimated 200 firms involved in maintaining trains), steep fare hike (the British pay the highest rail fares in the world), underinvestment (the most crowded trains in Europe, closure of thousands of stations and hundreds of routes, and sharp deterioration of rail safety) and an increase in State subsidy to the railways to five times the level prior to privatization.” Further, in its editorial dated December 5, 2017, The Guardian (internet edition) says: “There is a good case to return more train operating companies to State hands. Three in four voters, disillusioned by high prices and poor service, back renationalising the railways.”

The British experience amply proves that the cut, copy and paste model in India is destined to fail. A government that believes that it has no business in running business is out to defund our railways’ finances, eventually burdening the passengers with higher rail fare and the national exchequer with bigger subsidies or gap funding in the coming days.

The railway workers, trade unions and the working-class movement have begun protests against the privatisation move. This is an issue on which the people should be mobilised as it is going to affect them adversely.