Railway route privatisation is not as rosy it looks as there s no bar on competition on one hand and demand risks outweigh the benefits on other, even though the private operator is free to fix the tariffs, warns a report.
Currently, the railways cross-subsidises passengers by overcharging freigh to minimise the losses generated in running passenger trains.
Learning from previous public-private partnership models, the government has drafted a new concession framework for private train operators giving them autonomy to fix tariffs.
"But absence of a non-competing clause for the route amplifies the cash-flow risks on one hand and on the other bid variable or the revenue share, resembles ports or airports' concession model, where the experience has been mixed for concessionaires," notes India Ratings in a report on Friday.
Additionally, the operators are obligated to pay haulage harges towards track maintenance, signalling, terminals and others on a per km basis for 16 coaches train and cargo-related risks are higher than anticipated.