Indian Railways: The Economics of a Giant
Private Trains and Railway Reform
The debate over letting private operators run trains, why India's 2020 plan attracted little interest, and other reform ideas.
Should private companies run trains in India?
The 2020 plan
In 2020, the railways invited bids for private operators to run 151 modern trains on 109 routes. The response was weak, and the plan was later shelved.
Why investors hesitated
- Access fees to use tracks.
- Uncertain timetables and priority on congested lines.
- Competition with cheap government trains.
- No independent regulator to settle disputes.
IRCTC’s private trains
IRCTC, a railway company, ran the Tejas Express trains, offering premium service and compensation for delays, a small experiment in corporate operation.
Other reform ideas
- Corporatisation: turning Indian Railways into a company.
- Independent regulator for fares and access.
- Separating track ownership from train operations, as in some European countries.
- Accounting reforms to show true costs of services.
Lessons from abroad
- UK privatisation led to mixed results, and Britain later moved back towards public control.
- Japan’s private railways succeeded with dense cities and property businesses.
A private company studies a proposed route. It fears its trains will be delayed behind government trains on a shared track, with no regulator to complain to, and decides not to bid.
Success depends on regulation, track access and market design.
- India's 2020 private train plan drew little interest.
- Investors worried about access, timetables and regulation.
- Reform ideas include corporatisation and an independent regulator.
- Global experiences with private rail are mixed.
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