Privatisation of Indian Railways & Airlines is against National Interest
By Ritabrata, AIITEU Kolkata
The world’s fourth largest networking railway i.e the Indian Railways is being privatised owing to the greed of the BJP-led central government. It has offered 109 railway stations to private companies and those private entities are planning to run 151 trains in these railway stations.
If the Central government fails to withdraw the decision, the economy will be paralysed. The common man will not be able to access the facilities if the railways are privatised. This will impact all irrespective of class status. Indian Airlines owned by the GOI has been privatised and currently TATA group is owning the infrastructure.
DISADVANTAGES OF PRIVATISATION
Limited Coverage: An advantage of Indian Railways being government-owned is that it provides nation-wide connectivity irrespective of profit. Privatisation of the Indian railways would indicate the railways will become a profit-making enterprise, and this move by the government would lead to the elimination of less popular railways routes. Thus, the privatisation of railways can have a negative impact on connectivity and further increase the rural-urban divide.
Not Inclusive: Hike in fares can render the railways out of reach for lower-income groups.
Issue of Accountability: The privatisation of Indian Railways is not easy, as it covers every part of India and runs for 24×7 hours. The whole railway system cannot be handled by a single party or coordination as it will be very difficult to manage if area wise management is given to the private parties.
Impact on Economy: Indian Railways is the backbone of the Indian economy, it provides low fare transportation for agricultural and industrial trade. It is difficult to privatise a portion of the railways’ operations as it is strongly vertically integrated. Vertical integration of railways means ownership and maintenance of the rail and the associated infrastructure would all be vested under the Ministry of Railways. Therefore, the privatisation of Indian railways shall affect the Indian economy at large.
Railway Owned Space and Land: If you think of railway platforms — it is a source of revenue for the Government. And these places in turn don’t have much scope for fresh investment. For example, the Howrah junction platform is one of the biggest terminals in India and it has been handed over to the Adani Group. The revenue collection from this Terminal was huge, as more than 2 million people used this platform. These profitable spaces, if handed over to private players, will have a long lasting impact, as the sole beneficiary of these properties will be the private players. The GoI takes taxes from these properties. For a common person, why should they pay tax for a privately owned property? The price of the platform tickets have increased 10X times, from Rs 5 to Rs 50. So, once privatised, the burden of the load will always fall onto the common people or the consumers.
IRCTC had collected around Rs 300 crores as ‘convenience fee’ in the financial year 2020–21. Railway Ministry wanted IRCTC to share 50 percent of this amount, which comes to Rs 150 crores. For the last five years, IRCTC has been collecting and utilising all funds collected as convenience fees to run its operations. This stream of revenue will dry up once privatised.
Market Misadventures: When the stock market opened on the morning of 29th October 2021 , the Indian Railways Catering and Tourism Corp. (IRCTC) share price fell by 25% to ₹685.35. In the process, the company lost around ₹18,000 crores of market capitalisation overnight. This unstable market leads to a volatile situation and can lead to price hikes for the consumers, stoppage of certain services or loss of jobs for the employees.
TATA buying out the AIR India Service: This is one of the classic examples of how a deal is conducted by a private player and what devastating effect it can have on the consumers. The debt accumulated by Air India over the period sums up-to Rs 61,562 crores. TATA and Sons acquired a hundred percent of the Air India shares for Rs 18,000 crores. TATA has taken the responsibility of the debt which is around 25% and sums to Rs 15,300 crores. The remaining debt amount of Rs 46,262 crores will be taken care of by the Govt. Of India subsidiary called Air India Asset Holding Ltd. So, this debt will continue to be in the public sector whereas, if TATA makes any profit, that will be in the private sector. And, though TATA has confirmed that there will not be any employee termination in the first year of the acquisition, there is no guarantee from the next year onwards.
Airports: Though one airline can be debt or can be loss making, an Airport itself cannot be. Whoever uses the infrastructure of the airport pays for it. So, when the GoI privatises airports, it will again, same as the railway platforms, lose that stream of revenue. And that revenue will be collected from the consumers through various taxes. The profit from the Airports will go to a private player and any burden of loss or revenue loss will be covered up by the common consumers of this country.
A REVENUE GENERATING PUBLIC SERVICE
Indian Railways, over the years, has been one of the steady revenue flow streams for the Government. The Railways suffered a loss of Rs 38,017 crore in the passenger segment in the last fiscal due to the Covid-19 crisis. As far as the passenger segment is concerned, while it netted Rs 53,525.57 last year as revenue, this year it could earn only Rs 15,507.68, i.e. 71.03 per cent less.
The total passenger revenue between the period April 2020 to February 2021 is Rs 12,409.49 crores as against the Rs 48,809.40 crore for the corresponding period the previous year. The Railways managed to surpass the freight revenues of last year by Rs 1,868 crore or two percent as of March 22 — paltry gains, but a huge boost, given the problems that came with the coronavirus lockdown.
Nearly 70 percent of Indian Railway’s revenues come from the freight operations, which can be segmented into bulk and other cargo. Over the years, IR has predominantly become a bulk freight carrier, accounting for about 94 percent of the freight revenue. Coal alone accounts for nearly half of the bulk traffic carried. Passenger business accounts for nearly 60 percent of IR’s total transport effort, in terms of train kilometers, but yield less than 30 percent of the total revenues. Suburban services account for 57 percent of the originating passengers, while contributing to only 8 percent of the passenger revenue.
IR earned Rs 1,17,386 Cr from freight loading in FY 21 amid the coronavirus pandemic which is more than 3% than last year.
Indian Railways aspires to add about 1.5% to the country’s GDP by building infrastructure to support 45% of the modal freight share of the economy. The Indian Railways clocked a 3% increase in freight revenue in 2020–21 and the quantity of goods loaded grew by 1.93%.
The distribution of Indian Railways revenue is organised, financed and controlled by the Railway Ministry. The finances are allocated from the government treasury and whatever revenue it earns is deposited to the government treasury itself.
In 2016–17 (latest actuals available), Indian Railways spent most of its money on staff (41%), followed by expenses on pension fund (21%), and fuel (17%). In 2018–19, the total expenditure is estimated at Rs 1,88,100 crore which is a 4% increase over the revised estimates of 2017–18.
Railways used to pay a return on the budgetary support it received from the government (GBS) every year, known as dividend. The rate of this dividend was determined by the Railways Convention Committee, and was about 5% in 2016–17. From 2016–17, the requirement of paying dividend was waived off. The last dividend amount paid was in 2015–16, which was Rs 8,722 crore. The Standing Committee on Railways (2017) had noted that part of the benefit from dividend is being utilised to meet the shortfall in the traffic earnings of Railways.
DEFUND -> DEFUNCT -> PRIVATISE
Any privatization of a public sector follows a certain pattern. Defund, Defunct-ion, Privatise. The play is to defund any sector. When this is done the quality of service is bound to be affected. By defunding, the government ensures de-functioning of that sector. That creates a lot of outburst among the common public. And in the long run, that sector loses the support of the masses and thus becomes a loss making sector. This paves the way for any government to go for privatisation, by falsely claiming a people’s mandate.
The main objective of any government sector is to provide service in return of the taxes paid by the citizens. When key sectors like railways or airlines are privatised, the government loses its ownership and thus accountability.
Why should we as citizens continue to pay taxes and cover up public sector debts when the incumbent government is not accountable for anything? The Indian Railways is the country’s lifeline and all citizens must unite and stand against this move to privatise a revenue generating public service.
