The new business model for Indian Railways:
How does Private train model work?
In this model, the corporation takes all the decisions of running the service– fare, food, on-board facilities, housekeeping, complaints etc. Indian Railways is free from these encumbrances and gets to earn from IRCTC a pre-decided amount, being the owner of the network. This amount has three components- haulage, lease and custody.
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has to pay Indian Railways a sum total of these three charges, roughly Rs 14 lakh for the Lucknow Tejas runs in a day (up and down) and then factor in a profit over and above this. This money is payable even if the occupancy is below expectation and the train is not doing good business.
What powers does IRCTC have?
IRCTC insists that the coaches it gets from Railways are new and not in a run-down condition, as is seen in many trains. The quality of the coaches has a direct bearing on its business. In this model, IRCTC has full flexibility to decide the service parameters and even alter them without having to go to Railway ministry or its policies.
To that end, the business of running trains can be run with the independence needed to run a business with profit motive. This, policymakers believe creates the environment for enhanced service quality and user experience for the passengers.
IRCTC gets the freedom to decide even the number of stoppages it wants to afford on a route, depending on the needs of its business model. The Lucknow Tejas, for instance, has two stops, whereas the Mumbai-Ahmedabad Tejas has six stops. These stops are business decisions.
What is Indian Railways’ benefit from this model?
The bright side for Indian Railways is that it doesn’t have to suffer the losses associated with running these trains thanks to under-recovery of cost due to low fares and its own hefty overheads. The lease on its coaches is also taken care of.
Is this the same model for private train operators?
The model in which private train operators are sought to be engaged is different wherein along with haulage of Rs 668 per kilometer the operator needs to agree to revenue sharing with Railways. The company willing to share the highest percentage of revenue will win the contract. Private players may not need to pay lease and custody charges as it is expected that they will bring in their own rolling stock.
All this is because over the next five years, after the two dedicated freight corridors are operationalised and a lion’s share of freight trains move to the corridors, a lot of capacity will free up in the conventional railway lines for more passenger trains to run to cater to the demand. The government wants private players and maybe also its own PSU, along with Indian Railways, to share the load of pumping in more trains into the system.