No gravy train

Print edition : June 27, 2014

The shell of a coach on being moved from Kapurthala to the Rail Coach Factory in Rae Bareli. A global tender was floated to build modern LHB coaches in Rae Bareli, but no investor came forward.

AT present, foreign direct investment (FDI) in the Indian Railways is limited to some sectors, but the buzz is that the Narendra Modi government may look at increasing FDI in non-core functions of the Railways in a big way. While the Railway Board has made it clear that there should be no FDI in core functions of the Railways and the Home Ministry has flagged its concerns about investment by Chinese firms in projects near the international border with China from a security perspective, there is ample scope for FDI in areas such as coach and wagon manufacturing and modernisation of stations. International companies such as Bombardier (Canada), Siemens (Germany) and General Electric (United States) have reportedly expressed interest in being potential investors.

But, according to R. Elangovan, working president of the Dakshin Railway Employees’ Union, this is just glib talk to mislead the public. A global tender was floated to build modern LHB (Linke-Hofman-Busch) coaches at the Rail Coach Factory at Lalganj in Rae Bareli in Uttar Pradesh, but no private investor came forward. Later, a public-private partnership model was mooted, but that too did not pick up. Then it was done as a project of the Railways. Only 110 coaches are assembled there now whereas the installed capacity is 1,500.

Similarly, no private firm came forward for the dedicated freight corridor project. The Foreign Investment Promotion Board can clear any investment up to Rs.1,200 crore(above which Cabinet permission is required), yet the Railways has been unsuccessful in attracting private investment.

“Private players will come forward only in portfolio management. They like to invest in volatile markets where quick profits are guaranteed. They do not want to wait for 15 years for profit. This is nothing but a mantra to dissuade the public from government investment,” said Elangovan. Citing China’s example, he said the government there was investing Rs.1,80,000 crore a year in the railway sector. Argentina privatised 35,000 kilometres of line, but ultimately only 8,000 km remained with it, he said.

“According to the Indian Railways Year Book 2011-12, there is a loss of Rs.17,500 crore. The loss is Rs.2,984 crore because of suburban season tickets in Mumbai, Kolkata and Chennai alone. As many as 80 branch lines are operated on loss. These are social obligatory lines that the government operates and no private player will take on such a burden. On account of the passenger segment, the Railways is making a loss of Rs.25,000 crore. During the 12th Plan, only 0.62 per cent of the total planned investment came from PPP [public-private partnership]. In the 11th Plan, Deputy Chairman of the Planning Commission Montek Singh Ahluwalia set a target of 36 per cent private investment in the Railways. Finally, only 4 per cent came through. Both Lalu Prasad and Mamata Banerjee, as Railway Ministers, set targets of 20 and 50 world-class stations respectively, but nothing happened. Mamata Banerjee invited the captains of industry to run the Railways, but nobody came forward,” he said.

The move to open up the Railways to foreign funding began during the previous United Progressive Alliance government when the Department of Industrial Policy and Promotion (DIPP) under the Commerce Ministry prepared a Cabinet note on allowing 100 per cent FDI in high-speed train systems, elevated rail corridor projects, suburban corridors, high-speed tracks and freight lines connecting ports and mines. Train operations and safety were, however, not included.

Prime Minister Modi has expressed his desire to introduce bullet trains too. With the dismal record of accidents both on the tracks and at level crossings, the need of the hour is safety.

Divya Trivedi

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