Critical to the success of the government's move to allow private players to run trains would be the presence of an independent regulator to ensure a level playing field for all companies, said Vinayak Chatterjee, the chairman of Feedback Infra Group, a leading infrastructure services company.
"If private passenger trains are to succeed then the railways sector should get a truly independent authority. Requirement of an independent regulator is very important, and that is the horse before the cart," Chatterjee told Moneycontrol.
The presence of a regulator will also instil confidence among private companies to submit bids after the Railways minister, on July 1, opened up passenger trains beyond Indian Railways. The ministry invited qualification proposals from private entities to run trains over 109 pairs of routes by introducing 151 modern trains. The project would entail private sector investment of about Rs 30,000 crore, the ministry said in a statement.
The 109 original destination pairs of routes have been formed into 12 clusters across the rail network, and each train shall have a minimum of 16 coaches.
Without a regulator, Chatterjee noted, the established railways systems could be too dominant. Like in the container segment, the private sector may feel that it is not getting the treatment as expected. The infrastructure veteran reiterated that the regulator would be key to create a balance and ensure neither the public sector nor the private sector deviates from a level playing field.
The container segment was opened up in 2006. Even though about 15 private players operate in the segment at present, reports often emerge of these companies complaining about the dominance of Container Corporation of India Ltd, or CONCOR. The company is a Navratna Public Sector Undertaking under the Indian Ministry of Railways.
The concept of carriage and content
Welcoming the move to attract private players, Chatterjee noted that the move followed the concept of carriage and content that was often used in the infrastructure sector.
"For instance in a gas pipeline, the pipeline is the carriage and gas in the content. Similarly, airports are the carriage and airlines are the content and in railways, the tracks are the carriage and trains are the content," explained Chatterjee.
While the carriage is provided by the government, which lays the tracks and maintains it, the trains are run by private companies. It is a model successfully operated in Europe, said the senior executive.
Virgin Rail, part of entrepreneur Richard Branson's Virgin Group, is one of the well-known operators. The US market is dominated by private operators.
In India, too, over a dozen companies showed interest when the government first floated the concept. These included Indian groups such as the Tatas and Adani Group, and also international majors like Bombardier and Alstom.
Chatterjee said the commercial structure of the model floated by the government would be another important factor to ensure success of the big reforms.
"The jury is out if this will be a profitable venture. But many companies are now opening up to the operation and maintenance model, as it doesn't involve a huge capital investment," he said.
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