The Telegraph
Wednesday , July 9 , 2014
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Business has been booming for the Indian Railways, with passenger volumes having more than doubled, from 3,613 million in 1980-81 to 7,651 million in 2010-11, while originating freight has gone up almost five-fold, from 195.9 million tonnes to 921.73 million tonnes. However, trains still chug along at an average speed of 80 kmph, while the railways in Europe, Japan, and even China have entered the high-speed era of inter-city passenger trains hurtling along at 300 kmph.

With 1.7 billion tonnes of freight, privately owned railroads in the United States of America have captured over 40 per cent of the nation’s freight market share, and China is surging ahead with 2.3 billion tonnes of coal freight a year. On the other hand, the Indian Railways just managed to cross the one billion tonnes mark last year. As far as restructuring the railways in India goes, privatization has been suggested as a solution. But will it do the trick ?

Railway systems the world over have two distinct areas of functioning. One is the ‘operations’ or the business-generating end, which includes charging passengers for the journey, and the revenue collected from the transportation of goods. The other side involves the infrastructure of the entire system, which supports and sustains the running of trains. Management ‘gurus’ have tried to promote the concept of separating these two functions for the sake of privatization. This has often led to disastrous results.

The British Rail is a classic example of how things can go wrong. In 1993, it was split into almost a hundred private companies, each with its own profit centre. This resulted in various levels of contractors and sub-contractors with legal performance guarantees, built in with penalties for failure to meet targets. Overnight, a string of regulatory bodies such as the Office for Passenger Rail Franchising and the Office of Rail Regulator, sprang up to monitor trains and tracks and mediate in disputes. Reportedly, the infrastructural arm, the Network Rail, which is paid for by the government, piled up a debt of more than £20 billion, while getting almost four billion pounds in yearly subsidies.

More problems

It has now become evident that privatization has not freed the government from the financial burdens imposed by the railways. It has simply resulted in its inability to control and limit that burden. A recent letter to the Observer by a group of prospective members of parliament is an indication of the ordinary Briton’s disillusionment with privatization. The letter states that rail fares were contributing to a cost-of-living crisis, and season tickets had become the largest monthly expense for many commuters.

While wanting to “reform the rail industry to secure a better deal for passengers”, the prospective MPs added that train companies were walking away with hundreds of millions of pounds every year, despite running monopoly services and benefiting from four billion pounds of public investment in the rail network every year.

Interestingly, the London-Edinburgh mainline, which was taken over by the government in 2009, ran into financial difficulties. This has shown that there was a better way to run the country’s railways. In a major move to reverse privatization, the prospective MPs wrote that “a commitment to extend this successful model to the rest of the rail network, as existing contracts come to an end, would mean that hundreds of millions currently lost in private profit would be available to fully fund a bold offer on rail fares.” They added that passengers were paying high fares while tax payers were providing the subsidy to maintain the infrastructure.