Privatisation of Indian Railways – Part 2: Rail Privatisation – In whose interest?

Privatisation of Indian Railways (IR) is being carried out at the behest of Indian and foreign monopolies who want to acquire vast infrastructure, land and workforce of the Indian Railways at cheap prices. This is the real reason for step-by-step privatisation, pursued by all the parties that have been in power for several decades. Privatisation of the Indian Railways has been accelerated during the last few years again at the insistence of monopolies as they are looking for new avenues for reaping maximum profits to come out of the economic crisis, persisting since 2008.

People are however told that the purpose of privatisation is to provide better services by modernising IR. They are further told that the government does not have money to modernise IR so private capital from Indian and foreign capitalists is being invited.

A close examination of various proposals to invite capitalists to invest in ‘modernisation’ reveals how assets built with public money are being handed over for private profit and how privatisation would make an essential service like railway unaffordable for large number of working people of the country.

IR has invited private players to run 151 trains on 109 routes in 12 clusters from 2023 onwards. IR will provide all the infrastructure like tracks, signalling system. The contract for private train operation will initially be for 35 years. Capitalists will be required to only invest in ‘modern coaches’ but will also have the freedom to lease existing coaches from IR and upgrade them.

Private players have asked for a number of concessions before final bids are submitted by 30 June 2021. They want IR to offer them an alternate route in case the offered route is not profitable to them. They are also insisting that Indian Railways should not itself run any train one hour before and after their private train from any station within 50 km. Further they do not want Indian Railways to run any train till the capacity utilisation of the private train reaches 90 percent. In other words, private operators want IR to ensure that private train operation is profitable. They do not want IR to compete with them so that they can charge any fare without worrying about passengers having other options. Private operators have already been assured the freedom to fix train fares.

The private passenger trains will be run only when they are profitable. As soon as the passenger traffic fell due to the pandemic, the private Tejas trains were suspended. They were resumed when the traffic picked up but were again suspended when the traffic fell again due to the second wave of the pandemic. Providing reliable service is not the aim of private train operators.

Private trains are not expected to enhance the overall operational efficiency of the Railways. It is actually likely to worsen the operations of trains run by IR. Railway workers are already under pressure to give priority to private Tejas trains at the cost of other trains. As the number of private trains increase, the punctuality and service of IR trains will get more and more affected. Private operators are expected to insist on high penalties for non-performance by IR.

Rail map of India (Source:

Privatisation of passenger trains will not bring in investments for expansion and upgradation of the railway network, particularly of tracks, which is the major bottleneck today. As much as 40 percent of IR’s 1,219 line sections are utilised beyond 100 percent, according to a February 2015 white paper of IR. Technically, a section using more than 90 percent of its capacity is considered saturated.

On the contrary, public money is being spent to upgrade the infrastructure before it is handed over to private operators for running trains at a higher speed. A project to upgrade tracks and signalling and systems for running trains at higher speed on Mumbai-Delhi and Mumbai-Howrah routes at the cost of over Rs 13,000 crore has been taken up and is scheduled for completion by 2023, in time for operation of private trains on these routes. People are asking why the IR itself cannot run high speed trains on these routes and offer better service once the infrastructure has been upgraded.

Capitalists have been demanding that passenger fares must be increased by removing any element of subsidy and they are also insisting that freight on goods be reduced. The government has used pandemic to accede to raise passenger fares surreptitiously. Since the pandemic broke out, the IR has kept regular train service suspended even after one year and is running only limited number of them as special trains. The fare for these trains is roughly 25% higher than regular trains. This high train fare will become the base for private operators. Private operators have already been given the freedom to fix train fares.

Bulk of the users of the IR are working people who want safe, comfortable and affordable service. Uaffordable trains will deprive crores of people of an essential means of transport. Modernising cannot be used as an excuse for raising fares to assure profits of monopolies. Lakhs of working people using railways to travel to their places of work in large cities everyday will be badly impacted.

The Union Budget for 2021-22 laid a big emphasis on monetization of the assets of public sector enterprises, including railways. The Finance Minister announced, “Railways will monetise Dedicated Freight Corridor (DFC) assets for operations and maintenance, after commissioning.” Two corridors, Western DFC from Dadri in Uttar Pradesh to JNPT in Mumbai and the Eastern Corridor from Sohnewal (Ludhiana) in Punjab to Dankuni, near Kolkata in West Bengal, are being built at the cost of about Rs 80,000 crore and are expected to be operational in 2022.

IR believes that the cost of moving goods on DFCs will come down by 50% and the time to transport even more, as the average speed of a goods train on DFCs will more than double from the present.

Having spent such a large amount of public money on constructing DFCs, the government wants them to be handed over to capitalists so that they instead of IR can reap the benefit! Monetisation in effect means that public money will be used for creating modern infrastructure and then it will be handed over to capitalists for earning profit.  IR will only earn fees from capitalists for use of DFC tracks and other infrastructure while giving away the most lucrative freight business to capitalists.

In the name of modernising railway stations to provide better services to passengers, railways stations are being privatised. Most of the railway stations are located in the heart of cities where they occupy large areas of very valuable land. Big real estate companies and corporates want IR to take up station redevelopment so that this land is made available to them on long lease of 35 to 60 years for earning large profits.

Redeveloped stations will have modern facilities like shopping mall, food plaza, hotels, etc. but most of them will be of little use to the bulk of passengers. For example, a 5-star hotel is being built above the railway tracks as a part of the redevelopment of Gandhinagar station in Gujarat and the operation of that hotel has been handed over to a big corporate hotel chain, the Leela Group.

Going by the experience of modernised airports, most working people will find the cost of these facilities at such stations beyond their reach, where even a cup of tea will cost over Rs 100 and a bottle of water will cost twice of regular price.

In order to provide regular flow of income to private developers, the IR has decided to levy user development fee at the stations being modernised, the way it is being charged at all redeveloped airports. The fee will be made a part of the ticket and will be charged even from passengers arriving at a redeveloped station, who will spend hardly a few minutes at the station and not use any of the facilities. In due course, the plan is to charge the user development fee for use of every station above a certain size irrespective of whether the station has been redeveloped or not. People will thus be contributing directly to the profit of a developer besides paying for every service at redeveloped stations.

Capitalists are being further helped by designating station redevelopment as infrastructure projects. This will allow them to get bank loans at lower interest rates and avail tax concessions on profit.

Redeveloped stations will make many lakh porters, hawkers and other service providers jobless for the benefit of a few capitalists.

Besides land at railway stations, big corporates are also interested in vacant land of railways and land occupied by railway colonies, which too are in the heart of cities. I R owns approximately 4.81 lakh hectares of land, out of which, 90% of the land is used for track and structures including stations, colonies, among others. while 0.51 lakh hectares land is lying vacant.

Railway land is being offered on long lease for housing and commercial development for which IR will just earn lease rent.

Along with Indian monopolies, foreign monopolies are also interested in privatisation of IR. In 2014 itself 100% FDI was permitted in 17 key areas of railways. The supply of high-power electric locomotives is now monopolised by Alstom of France after the contract by IR to supply 800 locomotives at the cost of about Rs 19000 crore and set up a factory in Bihar for making them. Similarly, the supply of high-power diesel locomotives has become the monopoly of GE of USA with the contract to supply 1000 locomotives at the cost of $ 2.5 billion (Rs 18,500 crore) and setting up of a factory for the same. In 2020, IR announced its plan to electrify all rail routes so such expensive diesel locomotives will only be used in case of failure of electric locomotives!

The supply of metro trains has also been monopolised by Alstom as well as Bombardier of Canada, which was acquired by Alstom recently, with some supplies by the public sector BEML.

IR’s own production units were meeting the entire requirement of locomotives and coaches of IR so far and at a small fraction of the costs that are being forked out to the monopolies.

Capitalists see a big opportunity of profit in huge assets of IR of nearly Rs 6 lakh crore and its scale of operations. The total revenue of the Indian Railway in 2018-19 was a little over Rs 2,00,000 crore which would place the Indian Railway among the ten largest companies of the country, if it was an independent corporation. This large operation has been built over more than 150 years with public money. Capitalists are eyeing the profitable parts of this large revenue, leaving the socially necessary but often not profitable activities (to connect far flung areas of the country and to carry essential goods), with the IR.

The purpose of the claim that private players are being invited to provide better services to people is only to win their support for privatisation of IR. It is not in the interest of crores of working people. It will only serve the interests of big Indian and foreign monopolies.

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