The ministry of railways is set to sweeten the bidding conditions for potential operators of private trains in a second attempt to attract bidders.
These will include the creation of a grievance redressal committee, dilution of the investment conditions and lowering of the minimum base fare, sources close to the development said.
The changes have been made after extensive consultations with potential bidders in the past few weeks. The changes to the bidding conditions became necessary as the last round of bidding saw most potential private train operators opting out at the financial bidding stage. That forced the railways to scrap the tender.
“The ministry has responded positively to the industry’s request to create a regulator in order to avoid monopolisation of passenger traffic and routes. A grievance redressal committee is proposed to be set up,” said a source who participated in the consulting process with the government.
The grievance redressal committee will be constituted with government officials and representatives from the private railway industry in India, he added.
The absence of a technical regulator for train operators and the inability of the railways to commit to create one had soured the interest of many potential bidders in the Rs 30,000-crore tender floated last year.
A senior executive at a potential bidder for private train operations said that the Railway Board appeared willing to lower the minimum base fare in its new bidding criteria.
“While the industry had requested the government to do away with a minimum base fare in order to make operating private trains more viable, officials have said that they will consider lowering the minimum base fare,” the executive added.
The minimum base fare is the amount private train operators will be required to pay the government even if the train runs empty or the service is cancelled. The government had set a minimum base fare to protect its revenues in case of a drop in passengers or cancellation of train operations.
The railway ministry has also indicated that it was looking at ways to reduce the initial investment burden on private players.
“There have been talks on ways to let private players phase out their investment over a period 5-10 years rather than borrow large amounts from banks for an initial lump-sum investment,” the first source said.
“For instance, a private player bidding for Delhi-2 cluster will be allowed to phase out the Rs 2,400 crore investment over a period of 5-10 year, thereby leveraging their debt,” the person added.
Ahead of the bidding process for private train operations, the government had divided the country into clusters. Each cluster has an indicative project cost and average train distance of 900-1,052 km. The concessions will be awarded for a contract period of 35 years.
Another source said that the Railway Board was considering to lower haulage charges for private train operators after a certain period.
The Railway Board is also learnt to have recommended incentives to encourage private operators to deploy locally made coaches and engines to ease the bidding conditions.
“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,” said a government official.
The tender inviting bids to operate 151 private trains along 109 major routes was put on hold in August 2021. The process of inviting private participation had begun in July 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’s original projections, Indian Railways was supposed to select the companies to run the private trains by April 2021. The first 12 were expected to start working by 2023-24, followed by 45 more in 2024-25, 50 in 2025-26 and the last 44 by 2026-27.
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