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COVID-19 impact | Railways privatisation may get a shot in the arm

Railways has proven to be a key contributor in India's response to COVID-19 crisis. Freight and parcel trains have been transporting essential commodities and other items when other modes of transport have come to a halt.

April 30, 2020 / 03:45 PM IST
Representative image

Representative image

Infrastructure sector has been deeply affected due to the COVID-19 crisis. Despite the debilitating impact of the pandemic on the economy, Railways may see continuity in investment despite the economic slowdown, according to an expert.

Investment in railways, especially through the private route, was considered an important area as seen in the National Infrastructure Pipeline (NIP), which included planned investment of Rs 13 lakh crore towards railway infrastructure.

"The NIP also foresees up to 30 per cent of the 750 stations privatised and involvement of the private sector in rolling stock operations. The government has set an overall target of 40 per cent modal share of railways in freight operations," said Sameer Bhatnagar, Partner – Transport and Logistics, KPMG India.

Aimed at improving efficiency of the national transporter through involvement of private organisations, Indian railways aims to transport up to 30 per cent of net cargo volumes and 500 passenger trains by 2025 by private players.

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According to Bhatnagar, Railways has proven to be a key contributor in India's response to COVID-19 crisis. Freight and parcel trains have been transporting essential commodities and other items when other modes of transport have come to a halt. Thus, it appears imminent that this sector would be in the spotlight going ahead.

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However, this would require policy support, financial support, innovative funding and other reforms to enable spending.

The Union Cabinet in March approved a Memorandum of Understanding (MoU) signed between Railway Ministry with Germany's DB Engineering and Consulting GMBH for technological cooperation in the railway sector.

The government has also stated earlier that there is a proposal to outsource commercial and on board services of a few trains and to permit private players to induct modern rakes to run trains on select routes to provide improved service delivery to passengers.
While India appears to have better economic outlook for growth than other countries, investors are expected to be cautious about privatisation after the crisis, said Bhatnagar.

However, investors with deep sector expertise, sufficient capital and long term focus could bid lower but more reasonably and comparably between peers, offering more long term sustainability. As bids are expected to be lower, this may indicate better returns for investors.

As passenger trains may take more time to return to normalcy, track infrastucture and coaches may have less occupancy. This would provide a window of opportunity for maintenance, upgradation and expediting various railway works.

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Pramiti Lonkar
first published: Apr 30, 2020 03:33 pm