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Indian Railways privatisation | A look at other countries that have taken this route

Experts suggest that learning from past ventures, it is imperative that policy, regulation and operations be split for smooth functioning.

July 03, 2020 / 09:36 PM IST

The Indian Railways has kickstarted its plans to allow private companies to operate passenger train routes on its network. In line with this, it has invited request for qualifications (RFQ) for participation in 109 pairs of routes through 151 modern trains.

This is India's first such initiative for private investment in running passenger trains. A step in this direction commenced last year with the Indian Railway Catering and Tourism Corporation (IRCTC) introducing the Lucknow-Delhi Tejas Express.

Also Read | Railway initiates process to allow private players to run trains: Key highlights

But there are however concerns among industry experts regarding how the move will proceed and what steps would be required to ensure equitable opportunities for bidders.

“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,” Vinayak Chatterjee, the chairman of Feedback Infra Group, a leading infrastructure services company told Moneycontrol.

Also Read | Independent regulator will ensure level playing field as private companies run trains: Vinayak Chatterjee

Without a regulator, Chatterjee noted, the established railways systems could be too dominant. He added that the concept of carriage and content that was often used in the infrastructure sector and currently being successfully operated in Europe, could be used.

Also Read | Rail stocks gain after government invites private players to operate trains

Overall, the move to invite private players is being viewed as positive. India is not the first country to try its hand at nationalising its rail network. Over a dozen companies such as the Tatas and Adani Group, and also international majors like Bombardier and Alstom showed interest when the government first floated the concept.

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.

Here is a look at the other countries:

> Argentina: The South American country nationalised its rail network in 1948 under President Juan Perón. It was again privatised through concessions with infrastructure belonging to the state, in the 1990s under President Carlos Menem's neoliberal reforms. However, following severe deterioration, till 2015, most rail routes are back under state control.

> Canada: Following bankruptcy after World War I, several rail networks – Canadian Northern Railway, the Grand Trunk Pacific Railway, and the Grand Trunk Railway – in the country were brought under a central Canadian National Railways (CNR) in 1918 and subsequently privatised in 1995.

> France: The government in 1878 took over several small rail companies to establish the Chemin de fer de l'État. The state took 51 percent ownership in 1938, after Chemin de fer de l'État merged with Chemins de Fer de l'Ouest. A newly formed SNCF (merged of five main railways) was 100 percent taken over by the government in 1982.

> Germany: German railways was private and then nationalised by then Prussian government in 1879. The German Reich took over the railways in Prussia, Bavaria, Saxony, Württemberg, Baden, Mecklenburg-Schwerin, Hesse and Oldenburg regions after World War I. These lines were merged into the Deutsche Reichsbahn-Gesellschaft (DRG) in 1924. The DRG was privatised in 1937 by Nazi Germany. Post World War II, occupied Allied administrations split the DR into the Deutsche Bundesbahn and Deutsche Reichsbahn – both state-owned. Post fall of the Berlin wall and re-unification of Germany the two were re-merged into the public company Deutsche Bahn AG in 1994. The company still holds quasi-monopoly in passenger segment but has competition from private players in freight and short-distance routes. As of 2008 last there were plans for an initial public offering (IPO).

> Ireland: The Irish Córas Iompair Éireann was a merger between the Great Southern Railways and Dublin United Transport Company in 1945. It was a private limited company but nationalised in 1950. The last private rail line - Great Northern Railway - was also merged and nationalised in 1953. The assets are now split between Ireland and Northern Ireland (the UK).

> Italy: Italian railways has been unified and entrusted to five regional concessionaires, before nationalising it in 1905. The national operator Ferrovie dello Stato competes against the Nuovo Trasporto Viaggiatori which is part owned by SNCF and other private investors.

> Japan: The Railway Nationalisation Act of 1906 brought most of Japan’s private rail network under state control and till 1907 private companies were limited to providing local and regional services. Privatisation of the Japanese National Railways began in the 1980s and still continues under government and private JR Group.

> Russia: After the communist takeover of Russia, all railroads are under state control. The state-owned company holds monopoly over the mode of transport.

> Spain: Following the Spanish Civil War, the country’s broad gauge railways were nationalised as RENFE in 1941; followed by the narrow gauge routes. Some of these lines have since been given regional autonomy, but remain under national control.

> United Kingdom: The Railways were nationalised in 1914 due to World War I, but returned to private owners in 1921. That was also the year the Railways Act, 1921 forced 120 companies to merge into four – The Great Western Railway, the Southern Railway, the London and North Eastern Railway, and the London, Midland and Scottish Railway – this process was completed in 1923. British Railways was nationalised in 1948 and then privatised from 1994-97 as per provision of services under contract, where over 100 companies took over. In 2001, Railtrack went bankrupt and was re-constituted as Network Rail, a private company with no legal owner but effectively government-controlled via its constitution and financing.

Railways in Northern Ireland was nationalized in the 1940s and unlike British Rail, remain state owned.

> United States: US rail was nationalised in 1917 to service World War II efforts under the Federal Possession and Control Act, creating the United States Railroad Administration (USRA). In 1920, control was returned to owners and freight operators remain private enterprises. President Richard Nixon established Amtrak to encourage passenger operations. Amtrak subsequently bought some tracks from bankrupt railways as well as Conrail.

Experts suggest that learning from past ventures, it is imperative that policy, regulation and operations be split for smooth future functioning.

Jocelyn Fernandes
first published: Jul 2, 2020 04:42 pm