Special report | Railways

A better lifeline

The best way to modernise the railways would be to break the state monopoly

In need of private input

A WHIRL OF activity fills the dimly lit carriage. Passengers jostle and rip open paper bags containing linen for their bunks. It is a relief to leave the stench of Bangalore station, where tracks double as latrines. The Hospet overnight service departs a few minutes late, trundles along for 400km (250 miles) and arrives on time at dawn.

Like all Indian trains, it is crammed. Its cabins are worn and a bit grubby, the toilets holes in the floor. It is also cheap. A nine-hour trip on the best, air-conditioned berths costs 3,200 rupees ($50) for a family of four. Ticket prices were frozen by populist politicians who long ran the network, and only recently started to rise modestly.

The railways are a huge business: each day 19,000 trains carry 23m people and 3m tonnes of freight. But the state-owned monopoly is badly run. A former cabinet minister points to overstaffing, factionalism and bureaucracy.

A comparison with China is instructive. In 1990 that country had less track than India, but since then China’s rail network has grown by well over half, to 112,000km, whereas India’s has remained much the same, at 65,000km. As a share of GDP, China invests three times as much in its railways as India does. Spending per person is 11 times higher.

India’s politicians levied high freight charges to subsidise cheap rides for passengers. That diverted goods to less efficient, more polluting, overcrowded roads. Now rail carries just 30% of India’s freight, compared with 65% in the 1970s. Delivering coal to power plants is a crucial task for railways in both countries. In India this is a third costlier than in China, and a third slower—one reason for so many power cuts.

In a test of its efforts at state-directed modernisation, the new government wants to fix this. An official estimate suggests that for every rupee that the output of the railways goes up, the economy as a whole will be lifted by 3.3 rupees as other industries benefit from improved efficiency. Suresh Prabhu, the capable railways minister, plans a capital-spending splurge of $140 billion over five years. He plans to introduce market mechanisms where possible. To stimulate competition, he is creating 20 state-run corporations and perhaps 60 special-purpose vehicles that will be given autonomy to run parts of the network. Private (including foreign) partners can take part in much of this. Eventually units that run schools and hospitals and produce bottled water could be sold off. But outright privatisation of the country’s oldest government institution is not envisaged. The industry’s 1.3m employees and strong unions would not wear it.

In an early experiment, beginning in Bhopal, private investors will get the chance to overhaul decrepit railway stations. Thanks to better management, punctuality, revenues, safety, catering and hygiene are also improving. Traffic is up by 15% this year, says Mr Prabhu, and will rise steeply next year.

Adding tracks is harder. In the long-promised Delhi-Mumbai freight corridor, which is meant to open by 2019, the previous government managed to award only 600km of a 1,500km line to contractors.

“What matters is to be market-friendly, completely transparent,” says Mr Prabhu. Crucially, he needs to make it impossible for any successor to return to the old political meddling, when employment and tracks were handed out (and sold) to cronies. Some powers currently held by the minister will soon be devolved to an independent regulator. “I am rushing to give my powers away,” says Mr Prabhu, “so no populist politician would again want to have this job.”

This article appeared in the Special report section of the print edition under the headline "A better lifeline"

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From the May 23rd 2015 edition

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