Private Trains in India

Private Trains in India

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       »            Private trains in Indian Railways  - First time in its 166 year history -

       »            First Private Train is Tejas Express - Between New Delhi and Lucknow - From 5th October, 2019  - by Private player i.e., IRCTC - Indian Railways Catering & Tourism Corporation, a Public limited company of Indian Railways (recently made in Stock market debut/entry)

Swanky / high class features (aircraft - like frills) of Tejas Express - 1st Private train

ü  On-board entertainment

ü  Meals with local flavour / taste

ü  RO water purifiers in every coach

ü   Tea & Coffee vending machines

ü  Aircraft style trolleys to serve passengers

ü  Home to destination luggage pickup and drop facility.

ü  Free travel insurance with Rs. 25 lakh coverage

ü  Call buttons to request crew service

ü  Automatic doors

       »            However the above frills will come at a premium.   For example, fare between New Delhi and Lucknow costs Rs. 880 in Shatabdi Express (Indian Railways), the same is at Rs. 1125/- for Tejas Express (IRCTC) for Chair car.

       »            Onboard the Tejas Express - Ticket examiners & Service crew by IRCTC and Loco pilots and Guard by Indian Railways.

       »            IRCTC willl pay haulage charges and lease charges to Indian Railways.

       »            Advertisements  - Inside and outside of Tejas Express train coaches - Revenue goes to IRCTC

Let us check highlights of  Draft Documents for discussion on Private Participation in 150 Passenger Trains by NITI Aayog :-

Click for NITI Aayog Report

ü  100 routes

ü  10 to 12 clusters / groups

ü  Private investment of Rs. 22,500 Crores

ü  Concession Period - 35 years.

ü  Right to collect Market linked fares i.e., based on Demand.

ü  Flexibility for Class composition i.e., composition of AC and Sleeper coaches.

ü  Flexibility for number of halts.

ü  Procurement of Technology Agnostic rakes (train sets)  from the source they wish. But subject to compliance with output based standards & specifications.

ü  Two-stage Bidding Process – RFQ - Request For Quotation & RFP - Request For Proposal

ü  Bidding on cluster basis – Each cluster a project (entailing around 12 rakes)

ü  Bid Parameter: Gross Revenue Share. Selection of Successful Bidder based on highest revenue share;

ü  Each bidder eligible for award of maximum 3 clusters

ü  Access to track and signaling network on payment of Fixed pre specified haulage charges including terminal, traction, transportation, track maintenance, signaling costs, and overheads Annexure

ü  Compliance with pre-approved Train Operations Plan

ü  Access to Depot Site & Washing Line

ü  Use of concierge services

ü  Implement a transparent and non-discriminatory system for dispatch and movement of Trains

ü   Procurement of entire rake (minimum 16 coaches a Train)  - on Concessionaire (that is private player)

ü  Scheduled maintenance for first pit examination not before 31 days of the previous scheduled maintenance or a travel of ~40000 kms

ü  No examination of train before a travel of ~7000 kms*

ü  Trains to be prototype tested and ready for Operations as per Project Schedule.

ü  COD (Commercial Operation Date) - Deployment of first train on track

ü  Deployment of 100% Trains within 5 years

ü  Operations to start within 3 years from Appointed Date

Why Private Trains ?

ü  Introduce Modern technology Rolling Stock with reduced maintenance (POH)

ü  Reducing journey time

ü  World class service with improved user experience

ü  Capacity constraints lead to loss of passenger business to other modes i.e., Air traffic.

ü  Huge unmet demand. Reduced Supply Demand deficit. In 2017-18, Waitlisted passengers are 8.85 Crores which is approximately 15 % of Total Reserved passengers 65 Crores. 

ü  5% Railway reserved segment in CAGR (Compounded Annual Growth Rate) vis-a’-vis 13% air traffic growth (2013-18)

ü  Flexibility to procure rolling stock from source of choice, subject to compatibility with IR standards.

ü  Third-party certification by Accredited Independent Safety Assessor (ISA)

ü  Applicable till such time as RDSO adopts testing norms defined in UIC 518 or any other internationally accepted standards.

ü  Safety certification by IR before each trip based on travel worthiness certified by the Concessionaire

ü  Complete maintenance of Trains by Concessionaire

ü  Procure & install requisite machinery /plants for maintenance

Key Performance Indicators : -

1.       Punctuality – Delay of not more than 15 mins in departure/ arrival

2.       Reliability – Reduction in Guaranteed Reliability - Mean distance travelled between two Failures

3.       Upkeep of the Trains: Hygiene, Security etc

4.       Monthly Report on KPI (Key Performance Indicators) Compliance for each Train

5.       Damages for non-compliance of KPI – Calculated at a % of Haulage Charges

6.       For delay due to Authority i.e., Indian Railways - damages payable by Authority

Financials:

1. Concessionaire Revenue: User Fare - Demand, collect and appropriate Market Linked fare from users of Trains. Charges/fee for other related services
2. Concessionaire Payment: Concession Fee: Gross Revenue Share (% provided in the bid). Haulage Charges - from the date of commencement of operations; indexed (WPI - Wholesale Price Index) every 2 years per a pre-specified formula.
3. Termination Payment basis the Adjusted Depreciated Value of rakes on Concessionaire / Authority Default

Eligibility Criteria:

1. Eligible applicant may be a - domestic or international entity – government/private company, fund etc
2. Technical Capacity: Minimum sum of Rs 2700 crore over last 5 years. Against payments for development or construction of Eligible Projects OR revenue received from Eligible Projects
3. Financial Capacity : Minimum Net Worth - Rs 450 crore

Accidents:

1.        Relief & Restoration by Railways

2.       Compensation for claims in respect of loss of life, bodily injury, luggage and goods etc. to be covered under Insurance taken by the Concessionaire

Bidding Timeline - Private Trains

Invitation of applications under RFQ - Request For Quotation	Short listing based on Technical and Financial criteria	Invitation of bids from shortlisted applicants under RFQ	Selection of successful bidders for each cluster	Award of Project
January 2020 =T	T + 60 days	T + 70 days	T + 150 days	T + 180 days

Haulage charges (for 16 Coach Train):

Description	Haulage charge (Rs. TKM - Track Kilo Meter)
Terminal Cost	152
Traction (includes Energy)	158
Transportation	123
Track Maintenance	74
Signalling	27
Overheads	134
Total	668

Who mooted the proposal of Private Trains

»            In November, 2018, Niti Ayog released the document, ‘Strategy for New India @ 75’, and set goals for the year 2022-23 (75th anniversary of India's independence) and identified a diverse range of 41 areas that recognize the progress already made; and challenges that remain; identify binding constraints in specific sectors; and suggest the way forward for achieving the stated objectives.

Observations of Niti Ayog

ü  Railways share in surface transport is very low i.e., 33 percent in 2015 year ( 86 % in 1950 year ) due to shortfall in carrying capacity and lack of price competitiveness.

ü  The expenditure on the railways as a percentage of transport expenditure declined from 56 per cent in 1985-90 (7th plan) to 30 per cent in 2007- 12

ü  IR’s golden quadrilateral and its diagonals make up only 15 per cent of the total route of the railways but it transports 52 per cent of passenger traffic and 58 per cent of total freight load. This highlights the high saturation and over-utilized capacity on popular routes. Since passenger and freight traffic move on the same tracks in India, we have not been able to increase speed or capacity in a significant manner relative to global benchmarks.

ü  From 1950-51 to 2013-14, the route km increased by only 23 per cent against the growth in freight and passenger km of 1,344 per cent and 1,642 per cent respectively. This highlights the over burden on line capacity and saturation. The following table signifies saturation of the route track.

	Route KMs	Passenger KMs
1950	53596	66517
2013	65806	1158742
Increase %	23 %	1642 %

Targets by 2022-23 i.e., 75th anniversary of India's independence

ü  Achieve 100 % electrification of Broad Gauge track from 40 % level in 2016-17

ü  Increase the average speed of freight trains from 24 kms/hour to 50 kms/hour

ü  Increase the average speed of passenger trains from 60 kms/hour to 80 kms/hour.

ü  Creation of new lines from present 7kms/day to 19 km/day.  That is nearly 7000 kms new lines per year.

ü  Increase the share of non-fare revenues in total revenue to 20 per cent.

ü  Safety - Achieving Zero fatalities from 2016-17 level of 238 fatalities.

ü  Punctuality of trains - 95%

ü  Share of Freight movement from current level 33 percent to 40 percent. 

ü  Freight load of 1.9 Billion tonnes (from 1.1 Billion tonnes in 2017-18)

ü  Separate suburban passenger transport from the rest of the network and put a light rail network in place in all major urban areas under local governments.

ü  Complete the commissioning of the remaining 55 of the 100 new freight terminals announced in the Rail Budget of 2016-17 under ‘Mission Hundred’

ü  Opening up the ownership and operations of freight terminals to the Private sector

ü  Opening up the ownership of locomotives and rolling stock to the private sector under a transparent, neutral (nonrailway) and fair regulatory mechanism.

ü  Rationalize fare structures and subsidies, and monetize assets to generate revenues:

ü  Monetize land resources with the railways, particularly through developing non-railway revenues such as through retail or other activities.

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