FinanceIs Privatization of railways a good step towards development?

Is Privatization of railways a good step towards development?

The topic of privatization of railways has been in the news for two decades — Under the process, the Indian Railways will allow the private firms to operate the passenger trains on its network. The Ministry of Railways starts this process by inviting the Request of Qualification (RFQ) from the private sector for the operation of the passenger trains in India. The whole project of privatization will start getting implemented once the government gets at least 105 modern trains through 109 pairs of routes. The private partnership with the railways will be allowed to the extend of 5%, which implies that the rest of the 95% of operation will still be in the hands of the government. The private sector’s investment in the railways may reach up to ₹30,000 Crore. The Indian Railways has received a lot of appreciation for serving the largest democracy in the world, but with the appreciation comes the criticism as well. The people were not specified with the services, for example, catering, punctuality of service, and many other services.

Further, the mishaps, for instance, the accidents, questioned the reliability of the railways.

The need for privatization can be proved from various factors present in the country. The services that are provided to the passengers travelling can be improved by this method of privatization. According to the several data available on the sites of government for the year 2019-20, the railways carried around 8.4 billion passengers, and contrary to that, approximately 5 crore people couldn’t use the travelling services, i.e. the people on the waiting list. The pros and cons of privatization can be analyzed to come to a conclusion of whether the privatization of railways is a good or a bad step.

Where Does the Money for Privatization Will Come?

One by one, the government is selling the country’s national assets. Recently, to raise around ₹2.5 lakh crore through asset sales, the government has listed assets for the monetization that included roads, electricity transmission, oil and gas, pipelines, sports stadia, telecom towers, and many other things. Monetization refers to the process of turning a non-revenue-generating item into cash, which is especially used in the liquidation of assets or objects into legal tender. Apart from the assets that have been listed in the monetization that belong to the eight ministries, the government also planned the disinvestment of the equity stake of AAI, i.e. Airport Authority of India that is one of the joint ventures that has its operation in Delhi, Mumbai, Bangalore, and Hyderabad airports and the government is also leasing out the sports stadium, for instance, Jawaharlal Nehru Stadium in Delhi.

The government is trying to collect as much as money possible to get the privatization onto the track. Similar to this monetization, the government has made a lot of efforts to generate revenue through various other measures.

Need for the Privatisation of Railways:

The privatization of railways is a good or a bad step is yet to be decided as the debate of the same is in progress.

  • LOW-QUALITY SERVICE – Indian Railways carry more than approximately 8 Billion passengers in a year, increasing the burden of serving the people, directly decreasing the quality of the services provided. Indian Railways has also received a lot of criticism about the quality of the services, for instance, serving, catering, and punctuality.
  • REVENUE FROM RAILWAYS – The government faces a lot of issues because of cross-subsidization. It has severely affected the whole revenue generation system of the Indian Railways. Cross-subsidization can be described as the process in which the money that is earned through freight traffic gets diverted to meet the shortage in passenger revenue.
  • INCREASING MISHAPS – There has been a constant increase in the number of accidents happening in the Indian Railways. It is also said that privatizing the Indian railways will reduce the number of accidents in the first place and increase the quality of servicing the technical part.

Advantages or Pros of Privatisation of Railways:

  • BETTER INFRASTRUCTURE – there is no doubt about the fact that the infrastructure of Indian Railways will be improved with the entry of private firms into the market. Private firms will create a better infrastructure which will directly improve the quality of services being provided by the Railways. The passengers will get better amenities, and the journey will become more comfortable.
  • SECURITY IMPROVEMENT, private firms will use the maximum security and provide the best check on the rising number of accidents. The private firms will use modern technology for the services, reducing the risk associated with accidents or any other mishaps.
  • INCREASED COMPETITION – Competition in any market leads to a better quality of services. The private firms will face a lot of competition which will indirectly improve the quality of the services provided.

Disadvantages or Cons of Privatization of Railways:

Privatization has its advantages regarding the improvement of the service regarding the security, catering, punctuality, and many others. The advantages are also accompanied by its critics as well that are as follows:

  • REDUCTION IN THE OVERALL COVERAGE – The privatization would mean that the railways would become the profit-making entities. Therefore, the operation of Indian Railways will not be in function in the areas which is less popular or which brings less profit or no profit for these private firms, whereas Indian Railways, which the government operates, functions in many places irrespective of the profit generation.
  • HIGHER FARES – The private firms, along with increasing the quality of the services, will increase the fares. The lower or middle-class section of society will have to face financial issues and avoid travelling. Indian Railways, in the present scenario, provides services to the people with low income a chance to travel by railway; still, as privatization is famous, it will curb those chances for people will low income.
  • ACCOUNTABILITY IN QUESTION – The government will not give the whole control of railways to the private sector. One portion of the railways will be handed over to the private firm that will make the coordination between the two very difficult. It is not possible for any one party to handle the whole sector.

Therefore, should the railways be privatized, the debate might end after the step from the government? It would be interesting to watch the whole scenario and see the way the private sectors enter the market and make adjustments in the functioning of the Indian Railways.

Ruchika Sureka
Ruchika Sureka
Reading gives me the right mindset to think and interpret. The curiosity to read is something that makes me realize the diversity of literature and books we have in culture. I am very fond of books, and I like reading because it gives me peace.

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