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NITI Aayog's Amitabh Kant on getting private players for railways, its challenges and the recent fare hike

NITI Aayog's Amitabh Kant on getting private players for railways, its challenges and the recent fare hike

NITI Aayog's Amitabh Kant on getting private players for railways, its challenges and the recent fare hike
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By CNBC-TV18 Jan 10, 2020 6:40:45 AM IST (Updated)

The process of bringing in private sector participants to operate trains has been finalised, with about 150 routes identified for the same, said Amitabh Kant, CEO of NITI Aayog.

The process of bringing in private sector participants to operate trains has been finalised, with about 150 routes identified for the same, Amitabh Kant, CEO of NITI Aayog has said.

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Kant, who spoke to CNBC-TV18 recently, said that the request for proposal or request for quotation for "one of India’s most unique opportunities of bringing in private sector players into train operation" will be rolled out in the next one week.
"I wanted to tell you that we have finalised the entire process of bringing in private sector participants in the operation of about 150 private trains," he said in the exclusive interview.
Kant spoke at length about getting private players for select routes and stations, its challenges, as well as the recent fare hike. Here are the highlights of all that he said about plans for Indian Railways:
On private players for train routes and railway stations
Kant said that the routes and the train sets have been identified and the concession agreements have all been structured.
"The projects were finalised and then they went to the PPAC (Public Private Partnership Appraisal Committee) committee which approved it and then we have had a stakeholder consultation and there was a very good response," he said.
Kant said that a detailed exercise has been undertaken to identify 10 railway stations which the private sector will be bidding for.
"In the first lot, we have looked at about close to 10 railway stations on which a lot of homework had already been done. We have moved ahead — the RFP/RFQ notice for the first lot of five stations has already been issued and we will move ahead with another five," said Kant.
Kant is hopeful that the bidding process will attract some of the best players from the world.
According to Kant, private sector participation will be bringing in greater efficiency in the operation of train sets and 10 railway stations.
On challenges in bringing private players
Kant said that one of the main challenges in bringing private players for railways is the haulage rates are very high which makes the project commercially non-viable for companies.
"For the first time what we have done is that we have tried to bring down the haulage rate without loading all the other inefficiencies so that we are able to ensure a win-win situation which takes care of the interest of the government as well as the private sector," he said.
Kant is confident of a "fine concession agreement" which will ensure that there is a huge amount of private sector interest. "We are taking the feedback of the private sector into this."
Kant said that they have largely considered metro routes like Delhi-Mumbai or Delhi-Calcutta to make the proposal fairly attractive for the bidders. "We had a tough job to bring ourselves to the conviction that we need to do it to the right haulage charge which has now been agreed upon."
On operational integration
Kant said that to ensure smooth functioning, the key is to give complete operational freedom to the private player. "How he runs the train, what he provides internally, the quality of services that he provides, the extent of hospitality that he provides, how he brands, how he positions his product, how he markets it is all a function of a private player."
"The risk allocation is in such a manner that the risks as far as the track and the signalling system is, is rested in the railways, rest of the private sector and the market risk is all taken by the private sector," he added.
Kant further added that FDI of 100 percent is permitted in the railway sector both for railway stations as well as for the operation of trains.
On fare hike
According to Kant, the railway fares are over-subsidised in India. He said that the decision to hike passenger train fares was taken as over a period of time, the freight fare had been increased whereas the passenger fare had not. "We had done gross injustice to railways by not having a tariff regulator."
"This entire pricing system needs to be deregulated and it needs to have an independent regulator, it needs to be taken out of the administrative system of the railway and therefore this was much called for otherwise the operating ratio of the railways had gone totally haywire," said Kant.
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