Indian Railways Restructuring: Private Sector Involvement, A Beginning

Date01 December 2020
AuthorNand L. Dhameja,Manish Dhameja
Publication Date01 December 2020
Indian Railways
Private Sector
A Beginning
Nand L. Dhameja1 and Manish Dhameja2
Indian Railways (IRs), the world’s fourth-largest network by size, has a route
length covering approximately 68,155 km. It operates over 22,669 trains a day,
sixty per cent of which are the ones transporting about 844 crore passengers
and 123 crore tonnes of freight; two-third of its total revenue is from freight
and only 27.3 per cent are passenger receipts. It is the eighth employer in the
world employing about 1.227 people. It suffers from chronic under-investment,
low-capacity augmentation, congestion, and over-utilisation, safety problems
and poor-quality service, leading to poor morale, reduced efficiency, sub-
optimal freight and passenger traffic, fewer financial resources; and deteriorating
operating ratio.
The government on the recommendations of a high-level committee suggested
ways to mobilise resources and restructure the Railway Board; invited private
sector companies to operate 151 trains over 100 routes by April 2023 bringing
in an investment of `30,000 crore. The committee laid down a time frame of five
years for implementation of its recommendations.
The present study spread over five sections discusses observations and
recommendations of the committee and suggests the outsourcing of some of
its non-core functions like repair and maintenance workshops, manicuring units,
washing of trains, security, and employees’ facilities like medical and education.
Indian Journal of Public
66(4) 492–512, 2020
© 2021 IIPA
Reprints and permissions:
DOI: 10.1177/0019556120980880
1 Faculty of Management Studies, Manav Rachna International Institute of Research and Studies,
Faridabad, Haryana, India.
2 Senior Banker, South Africa, UAE & India.
Corresponding author:
Nand L. Dhameja, Dean, Faculty of Management Studies, Manav Rachna International Institute of
Research and Studies, Faridabad, Haryana 121004, India.
Dhameja and Dhameja 493
Restructuring, privatisation, core and non-core activities, policy formulation,
commercial accounting
The government of India has decided to invite the private sector for railway oper-
ation and 151 trains over 100 routes will be run by the private companies by April
2023. This article analyses the introduction of reforms and restructuring of Indian
railways. The article is divided into five parts. The role, significance and growth
of railways over the years in the Indian economy are discussed in the first part.
The second part presents, in brief, the pros and cons of the railways’ recent deci-
sion to involve the private sector in rail operations. High-level committee’s obser-
vations and recommendations for the reforms in railways have been discussed in
part three. This part also presents the time frame for the introduction of the various
recommended measures. The fourth section discusses the experiences of privati-
sation of railways abroad and lessons from that. The last section contains certain
likely roadblocks and the way ahead for reforms in Indian Railways.
Indian Railways (IRs) is the world’s fourth-largest rail network by size under
single management and has an established route length of over 68,155 km as on
31 March 2019. It is the lifeline of the nation, operating over 22,669 trains a day,
sixty per cent of which are the trains transporting about 844 crore passengers and
123 crore tonnes of freight every day. From a very modest beginning in 1853,
when the first train steamed off from Mumbai to Thane, a distance of 34 km, it
has grown to a vast network of 7,321 stations with a fleet strength of 12,147 loco-
motives, 74,003 coaches and 289,185 wagons as on 31 March 2019. The network
spans 123,542 km of track length, while route length is 68,155 km, of which 90
per cent is broad gauge. It generates 100 per cent freight output and 99 per cent of
passenger output. It is the world’s eighth-largest employer employing about 1.227
million people; it contributes one per cent to GDP and is expected to add up to
two per cent more to GDP. It also takes pride in its staggering numbers as 131,205
bridges, 12,147 locomotives, 74,003 passenger coaches and 289,185 freight cars.
(This part is an updated version of Chapter 12, Dhameja & Dhameja, 2016; and
Raghuram & Gangwar, 2008)
Originally, the railways were operating as private companies owned by
Englishmen, with a certain concession such as guaranteed minimum return and
free land. To guard against complaints of private ownership and poor manage-
ment, the government took over a private rail company in 1925, and by 1950 the
rest of the other private-owned rail companies including the ones owned by the
former princely states were taken over by the government.
It may be noted that the route length of railways was 53,596 km in 1950 and it
increased to 68,155 km in 2019, an addition of 14,559 km adding a length of only
211 km per year. As such, there was a need to move faster, to connect people and
places across the nation. Despite all this, the operating performance of railways
depicts a dismal picture as reflected by the operating ratio discussed later.

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