Why it Pays to Platformize Indian Railways & Not Privatize Through Disinvestment

The commerce ministry has proposed to open up 100% FDI in Indian Railways. We still don’t know the details about the latest proposal, but a similar proposal was made in August 2013 by the outgoing government. Press reports point to the same areas, but there are expectations that many more areas will be opened up in the current proposal.  

It is good to see that rail is a priority agenda item for the new government which also has the mandate to change things. The Prime Minister’s statements before the elections and signals sent by the Railway Minister Sadananda Gowda indicated a desire for privatisation, FDI and bullet trains. These are presumably around the goals of bringing money for the government, spurring business for private players, improving the efficiency of the Railways and making an impact on economic activity through transport.

Railway Track

Projects like bullet trains, PPP for new freight corridors, suburban rail projects like Namma Railu, will give capacity-enhancement benefits comparable to that of Konkan Railways, metro projects and the golden quadrilateral scheme of the Vajpayee-government. Hence these should be pursued.

However, from an entrepreneur’s perspective, this alone may not mean much for new business generation. As shown with the earlier proposal, only big companies like Bombardier, General Electric, Amadeus etc. benefit from big ticket projects. A number of Indian businesses that are currently doing contract work with railways at the divisional and zonal levels will probably henceforth sub-contract work from big companies. The rest will stay the same, same old tenders, same old red tape.

The same goals can be achieved without jeopardising the social goals of Railways and benefitting entrepreneurs. Rather than privatising through disinvestment and auctioning of assets, Indian Railways should be platformised, federated and a strong service layer be opened up for private players to build on. This approach builds value. Just opening up the information platform for third-party services can unleash businesses worth Rs.5000 crores per annum.

I’ve outlined such a platform in  Indian Railways should arrive at Platform Number 1 [Of Org Structure, API, Data Platform] – NextBigWhat and  SmartRail World: ‘An agenda for change’ – a to-do list for the next Indian Minister of Railways.

If such measures are brought in, we can see Indian and international startups creating new businesses and services that benefit rail users. SilverRail has aggregated ticket inventory across Europe, Yadwire from Israel promotes ad-supported free Wi-Fi in public places, our own TravelKhana and Mera Food Choice are providing food delivery directly to the rail berth and so on.

From my discussions with such companies and many other Indian entrepreneurs, I know that they find a huge potential in the 8 billion trips’ Indian Rail market and are raring to go. If we want the next Uber to come out of here, FDI is not the answer, but a revamp of the service delivery model from tenders to platforms is. I’ll wait for the full proposal to see whether there are any moves in this direction.

[About the author: BalaSundaraRaman (Sundar) is a co-founder of Ideophone, a solution provider for travellers and commuters. Besides being a rail fan, he has worked with various arms of Indian Railways from the divisional level up to the Railway Board in his efforts to launch a novel wakeup call service called Pyka, based on Ideophone’s technology. Write to him on sundar@ideophone.in or follow him @oligoglot on Twitter.]

Image Credit: Rajesh Narayanan / Shutterstock.com

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