Tejas Express: Indian Railways' Leap toward Privatization?
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Case Code: ECON078 Case Length: 16 Pages Period: 2017-2019 Pub Date: 2020 Teaching Note: Available |
Price: Rs.500 Organization : Indian Railways Industry : Government & Non-Profit Organisations Countries : India Themes: Public-Private Partnerships, Public Policy, Government & Economy, Macroeconomic Environment |
Abstract Case Intro 1 Excerpts
"[The government's plan] is something which can be done only in stages. What was being done on an experimental basis was the right way to go about it. The most complicated aspect is how they [private players] will use the railway tracks to run trains without interfering in the current state of affairs."
– Madan Sabnavis, the Chief Economist of CARE Ratings, in November 2019.
"So, in four to five years, we will be able to run trains according to demand. There will be no waiting lists. But that will also mean that a large number of new trains will be required. The role of the private trains comes in here."
-Vinod Kumar Yadav, Chairman of Indian Railway Board, in September 2019.
Introduction
In October 2019, the Indian Railway Catering and Tourism Corporation (IRCTC), a subsidiary of Indian Railways (IR), announced that a premier private train called the Tejas Express (TE) that it operated between New Delhi and Lucknow had made a profit of around Rs 4 .7 million and revenue of nearly Rs. 37 million through ticket sales, in the first month of its operations. The TE group of fully air-conditioned trains were India's first semi-high speed trains and were introduced in 2017. 'Tejas' meant 'sharp' and 'brilliance' in many Indian languages. The TE's had received decent feedback about its facilities and passengers felt that the on-board services were of global standards.
Consequently, IR decided that it would be the ideal venture for it to try out a form of privatization. Therefore, it handed over the operations of its newly launched New Delhi-Lucknow TE to IRCTC. The New Delhi-Lucknow TE that began its operations on October 4, 2019, was run by IRCTC under the public-private partnership (PPP) model. This also marked the first move made by IR to bring in private train operators to provide world class passenger service to Indian passengers.
Though the New Delhi-Lucknow TE was a success, it encountered a fair bit of controversy and also gave rise to protests from IR employees, who felt that privatization would have a negative impact on their jobs. However, the Government of India (GoI) made it clear that it would never go in for complete privatization and was in fact only looking to bring in private players for operating certain routes and railway stations, with the intention of improving service standards. In late 2019, IR appointed a task force to come up with a blueprint for developing 50 railway stations in India which would be of world class standards and allowing private passenger train operators to run 150 trains on its network. It also planned to launch a TE between Mumbai and Ahmedabad that would be managed by IRCTC.
It remained to be seen whether IRCTC's success would continue with the second TE. Moreover, it was not yet clear whether IR would eventually succeed in its plans to bring about a kind of privatization in a public service with myriad issues such as the railways, especially in a vast and complex country like India.
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