Fresh attempt to introduce private trains likely to be announced in Union Budget for 2022-23

The government is set to make a fresh attempt to attract bidders to operate private passenger trains along 12 identified clusters across the Indian Railways’ network. An announcement to that effect is expected to be made by Finance Minister Nirmala Sitharaman when she presents the Union budget for 2022-23 on February 1.

The last round of bidding involving an investment of Rs 30,000 crore was scrapped in August as just two companies submitted financial bids although dozens had shown interest.

Indian Railways has now revised the tender conditions to attract more bidders after consultations with investors and industry experts. It is understood to have agreed to establish the Rail Development Authority (RDA) as a regulator to, among other things, advise the government on fares, promotion of competition and creation of a positive environment for investment.

Top government sources told Moneycontrol that the railways has submitted a revised proposal to the finance ministry for restarting the bidding process. The setting up of the independent regulator was also included in the proposal sent to the finance ministry.

That apart, the Railway Board is learnt to have recommended incentives to private operators for deploying locally made coaches and engines and reduction in haulage charges to sweeten the bidding conditions.

“One of the main feedback that the government received from the industry was the need to set up a regulator to ensure smooth operations of private trains in India,” the official said. The proposal for setting up the RDA was originally approved by the government in April 2017.

It is learnt that the Railway Board has proposed that the RDA should have members from both the railway ministry and public sector utilities involved in railway operations.

The proposal submitted by the Railway Board to the finance ministry plans to invite bids from private operators for running more than 150 passenger trains in India from the next financial year, officials said.

Rail Bhavan has identified about 100 destinations that will be served by passenger trains run by companies that win the contracts. Most destinations are expected to be the same as was in the bids invited in 2020.

The Railway Board is also considering reducing haulage charges for private train operators after a certain period, another senior government official told Moneycontrol.

The ministry is also considering a push for Make in India. “A proposal is being considered where private train operators will either be given tax rebates or a subsidy to use locally made coaches and engines on the trains they want to operate,” a government official said.

In August, the ministry had put on hold the tender for 151 private trains along 109 major routes at an estimated investment of Rs 30,000 crore due to poor participation by private firms.

Indian Railways had begun the formal process of inviting private participation in operating trains on 109 routes on July 1, 2020. The national transporter planned to introduce private trains on its network in phases, with the first dozen due to start running in the 2023-24 financial year and all 151 by 2027.

However, only two bidders, IRCTC and Megha Engineering & Infrastructures, participated in the financial bidding stage, though 120 applications had been received from 16 companies at the request for qualification stage. This, officials said, raised questions on the purpose of running trains via private players.

According to the ministry, the planned investment was estimated at around Rs 30,000 crore, and a majority of the rakes (70 percent) would have to be manufactured in India; private entities cleared to run the train services were to be responsible for financing, procuring, operating and maintaining the trains. The winning bidders were to be provided a concession period of 35 years on revenue.

According to the ministry’s projections, Indian Railways was supposed to select the companies to run the private trains by April 2021. The first 12 were expected to start plying by 2023-24, followed by 45 more in 2024-25, 50 in 2025-26 and the last 44 by 2026-27.