Privatization of Railways

“Rising demand for coaches, locos and wagons cannot be met immediately,” was exactly what Mamata Banerjee said in her Railway Budget speech for 2011-12. She pointed out that the capacity for wagon manufacture is limited in and some of the required components aren’t made in India. Her allocation of Rs. 13,820 crore for the purchase of 18,000 wagons during the year is a record for the Railways, but still inadequate an economy growing at 9 percent per year.

Given the level of efficiency and sophistication achieved by the railway sector in many foreign countries, it is perhaps fair to note that the Indian Railways has a long-long way to go. In most foreign countries, the railway industry is bristling with competition among private players who have steadily moved beyond manufacturing of locomotives and rolling stock into operating most of the urban networks. In India, however, even manufacturing of rolling stock continues to remain the exclusive forte of public sector companies. Unlike in telecom or roadways, the level of involvement of private players in railways continues to be blocked by government.

The existence of a Railways as an important ministry portfolio speaks for itself. Railways remains the single biggest public job provider to Indian masses. One might argue that every institution, private or public should be autonomous and must manage to generate income for the country’s overall GDP. My argument is the exact opposite. Government’s role in a developing country is to provide adequate health, welfare, retirement benefits, education and infrastructure. Not every section should be run on itself. Why do we subsidise big corporations and not Railways? If every system runs on itself, why should we pay taxes at all?

Indian Railways is a socio-economic phenomenon. It is the leading representative of the democratic values India stands for. It has shown impressive growth and its turnaround story is a case study at leading Business schools. Lessons from privatization of British Railways are not very encouraging. Infact, British railways may even get Nationalized in the years to come. I believe that railways needs to remain affordable as an infrastructure for daily commuters more than anything else. Railways remains the common man’s  backbone. Instead of speed and privatization, efficiency and affordability should be the primary focus.

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3 responses to “Privatization of Railways

  1. When private companies are in competition with a state owned entity in a country like India, what we’d be left with is an Air India. Didn’t we learn anything from it?

    Also railways is such a capital intensive business with low margins that private companies usually don’t want to get into that. They usually do not have the capability and the capital to run the railways.

    France (Western Europe in general) has arguably the best railway system in the world and most of it owned by the government. It used to be private till the 1970’s but the quality of service and the high speed lines that are its hallmarks were possible only after the govt. took over!

  2. In my opinion, Indian Railways should never be privatized simply because it is not just a profit making firm that runs trains in India. It is the largest employment scheme ever deployed by the Indian government. Privatization of Railways will lead to ‘optimization of corporate resources’, and millions of Indians will lose their livelihood.

  3. Indian railway should be privatised with some restrictions on income like in electricity companies . Govt should gave chance to new players which leads to increase in quality in indian railways. As we see in other sectors like telecom sector competition works mostly in favour of consumers.
    As new players came with better strategies which helps in generating more income,more funds to govt. And helps in generating more jobs . As now says when a group of people wants to raise his voice or want to fulfill their demands they simply go and sit on railway tracks and stop trains until their demands are not fulfilled because railways are under goverent hands. Now days railways do nothing for safty, corruption is pervasive , stats which shows development is only in papers many of things which shows in papers dosent exist. Most of the tickets sells through brokers.All this got reduced after privatization. As private co. Came with better tchnology, better corporate culture, new ideas etc.
    Once railways got privatized ,IRTC came under same situation in which (after privatization if air transport) air india currently in.

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