Sector-specific PPP landscape

Although the railway sector opened for private sector participation more than 20 years ago (through a policy on development of goods sheds or sidings by private investment in railway premises, dated 23 October 1997), it has remained primarily in the non-passenger category. In 2006, the government issued a policy document and an MCA for private container train operations, giving private sector operators a nonexclusive right to haul the concessionaire’s trains carrying export–import traffic and/or domestic traffic on identified routes. The Private Freight Terminal scheme was launched in 2012 and was later revised in January 2015. This policy aims to attract private investment in setting up freight terminals through revenue-sharing principles.

The government introduced multiple railways policies and schemes on rolling stock for freight trains at various times:1

• Wagon Leasing Scheme. Launched in 2008 and revised in 2014, this scheme aims to develop strong leasing market by encouraging third-party leasing of wagons (35-year term after signing).
• Liberalized Wagon Investment Scheme. Launched in 2008 and revised in 2018, the policy seeks to provide investors with the benefit of owning and running the wagons with a special rebate in the freight (20-year term after signing).
• General-Purpose Wagon Investment Scheme. This scheme is the latest policy addition established in 2018 to encourage private investment in general-purpose wagons, such as BOX or BOXN (high-sided bogie open wagons with side discharge arrangement for loading of coal and other bulk traffic) and bogie compressed pneumatic or BCN (a special type of bogie-covered wagon with a higher carrying capacity and air brake). The scheme does not include special purpose wagons that are designed to carry a specific commodity. A rebate of 10% shall be given on the base freight on each loaded wagon. Such rebate, however, shall ordinarily be for a period of 15 years subject to a cap to the extent of the lease charges payable by the Indian Railways to the Indian Railway Finance Corporation for procurement of rolling stock. If the investment has been recovered in a period of less than 15 years, the freight rebate shall cease from the date of such full recovery. To increase private sector interest, the Indian Railways, in November 2019, liberalized the scheme, under which (i) end users (other than logistics service providers) also have been granted permission to load third-party cargo in their rakes in empty direction, which would not only reduce the empty run of the General-Purpose Wagon Investment Scheme rakes but will also entail additional revenue to end user investors in the form of freight rebate; and (ii) the design loan charges on general-purpose wagons have been reduced from 5% to 1%, which will help minimize the initial investment required for procuring wagons.
• Automobile Freight Train Operator Scheme. The policy, launched in 2021, aims to provide an opportunity to logistics service providers and road transporters to invest in wagons and use rail transport to tie up with end users.
• Master Circular on Gati Shakti Multi-Modal Cargo Terminal. Launched in 2021 and modified in 2022, the policy seeks to promote the growth of new cargo terminals and improve existing ones.

Further, there were policies in the operations of freight trains in specific categories:

• Liberalized Special Freight Train Operator Scheme issued in 2013 and revised in 2018 and 2020. The policy provides opportunity for logistics service providers or manufacturers to invest in wagons and take advantage of rail transport in tying up with end users and in marketing the train services they own for rail transportation of select commodities, which would be beneficial for railways and private players themselves (valid for a period of 20 years from the date of commercial operations of trains by the Special Freight Train Operator, extendable to 20 years).
• Automobile Freight Train Operator Scheme issued in 2013 and revised in 2015 and 2021. The policy provides opportunity for private logistics companies or transporters to run freight trains catering to the automobile sector with a flexibility to induct new higher capacity wagons, provided they meet the conditions set by the Research Design and Standards Organization (valid for a period of 20 years from the date of commercial operations of trains by the Automobile Freight Train Operator, extendable until expiry of the life of the wagons).

The above items fall within the classification of licenses. The Indian Railways formulated participative models in the construction of fixed rail infrastructure. Five of these models were developed to cater to state governments, local bodies, ports, companies, and foreign direct investors. The five models are nongovernment railway model; joint venture model; BOT through competitive bidding model; customer funded model; and capacity augmentation, annuity model. Of these five, the nongovernment railway model and joint venture model have seen some success.

The Station Redevelopment Program by Zonal Railways was launched on 8 February 2017, and 23 stations were taken up for bidding during the first stage. The modified Swiss challenge method was selected for the redevelopment of the first 23 stations.2

In 2020, the Indian Railways issued a draft MCA for public consultation in the areas of railway station development and operations of passenger trains. This is the first instance where the private sector is being invited for train operations. The Ministry of Railways also prepared an indicative list of 100 origin– destination pairs to introduce train services by private entities, divided into clusters such that each cluster would require operation of a minimum of 12 rakes.3

In 2019, India’s first privately run train, Lucknow–Delhi Tejas Express, by the IRCTC, a public sector unit under Indian Railways, began operations. With the Tejas Express being managed by the IRCTC, the physical infrastructure of the train, including locomotives, coaches, loco pilots, guards, and security personnel, are owned by Indian Railways. However, the services provided, such as ticketing and refunds, parcels, catering, and housekeeping will be contracted to private players through the IRCTC under the PPP model. The IRCTC has signed concession agreements with private service providers, under which operators will share their profits with the IRCTC, which in turn will pay haulage charges to the railways.4

The government plans to open passenger train operations for more private sector players. However, tender for passenger train operations launched in October 2020 with the Ministry of Railways had to be withdrawn in November. The scope of the project broadly included designing, engineering, procurement, financing, and O&M of passenger trains, either with distributed power or through powerheads, comprising a minimum of 16 coaches. Train services will be provided for more than 109 origin-destination pair of routes grouped in 12 clusters through introduction of 151 modern trains. The 109 origin–destination pairs have been formed into 12 clusters (projects) across the Indian Railways network. The railways have identified about 100 destinations where passenger trains will be run by companies that win these private contracts.

• 1Government of India, Indian Railways. Master Circulars (accessed 15 July 2023).
• 2Indian Railway Stations Development Corporation Limited (accessed 15 July 2023).
• 3Government of India, Ministry of Railways. 2020. Draft Model Concession Agreement for Discussion on Re-development of Railway Station. 20 January.
• 4I. Mufti and R. Sampal. 2019. Why Tejas is ‘1st Private Train’ — Railways Owns It, Outside Vendors Provide Food and Clean It. The Print. 6 October