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Privatise the Railways
There are a few mega churns that any Indian government needs to do across the next 2500 days, if we are to shift gears to race forward.
THE NEXT 2500 days are important because at the end of it India would have been married to market economy for 30 years; and 30 years is a long time even in the life of a nation.
It is time that the government seriously looked at part privatising the railways. The money can be used to modernise railways.  Let me explain the background and the way forward.

India established its railways in 1853, a good 24 years ahead of China. By 1947, Chinese railway was 50 per cent the size of Indian railway. By 2010, China’s network is 50 per cent ahead of India!

China freight carriers clock 120 kmph against our 26 kmph. China’s passenger trains run at 200 kmph. India’s “super fast express” manage an average speed of 60 kmph!  China is now concentrating on ‘350-400 kmph’ passenger dedicated lines (PDLs).

To catch up, Indian Railways need to improve efficiency and invest heavily. We need bullet trains that would run at 350 km/hr. But where will the money come from? In a country where FDI is a dirty abbreviation, privatisation is one route. In fact it and it alone would harness innovation, bring investments and unleash the animal spirit.  
Take China for instance. The Chinese railway business is broken into five major railway corporations each handling a specific function. Each is autonomous, although state-owned. A number of passenger and freight companies have been created to operate on a competitive basis.

Slack on the track

If Indian Railways doesn’t modernise fast, it will quickly become a basket case. Consider these:
  • Our operating ratio for 2012-13 is 88.8  per cent, whereas it is 75 per cent for Chinese railways.  Part privatisation will pull the railways out of its slumber.
  • Our revenue per passenger km is just 22 per cent of revenue per tonne km. In contrast, commuters in China, Korea and France pay 1.4 times more than those who move cargo by rail. Part privatisation will take pricing to its correct levels.
  • Our infrastructure is inadequate. We carry 6.2 billion passengers every year, yet since 1950-51, our route-kilometres have increased by just 18 per cent. Private ownership can turn railways into gold.

Way forward

  • It’s time for the elephant called Indian Railways to dance.
  • We need big ticket investments. We need bullet trains that run at 300 km/h that would ease our air traffic. Some estimates place today’s  cost at Rs 10,000 lakh (a k a 100 cr) per km. At that level, the Chennai-Bangalore route of 330 kmkh will cost Rs 33,000 crore. Quick calculations suggest that to profit, passengers should be charged Rs 5 per km; in this case Rs 1650. This is about $33 or $0.10 per km, which is on par with pricing in the US. That’s fine; as you would reach Bangalore in 75-minutes flat. Contrast this with a 1st A/c price on the Shatapdi and you notice that this is only about 70 per cent more.
  • We must adopt differential pricing. Peak hour rates have to be different from the non-peak hour rates. The lower berth must be priced  higher than the upper berth.
  • Railways is sitting on 43,000 hectares of vacant land whose current market value is Rs.22 lakh crore. Let’s convert that into cash. To the private investors provide tax breaks. Name stations        after the funding corporate. Place advertisements inside and outside the bullet trains. Railways have it in them to work as efficiently as corporate India and give airlines a run for their money. 
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