How India’s Railways’ Corporate Train Model Works

India’s railway system has been pushing a new train model known as the ‘corporate’ train model, with the introduction of the Kashi Mahakal Express, making it the country’s third such train after the two Tejas Express trains between Delhi - Lucknow and Mumbai - Ahmedabad. This model aims to outsource the running of regular passenger trains to the Indian Railways Catering and Tourism Corporation (IRCTC). Let’s delve into how this model functions.

Overview of Corporate Train Model

Under the Corporate Train Model, the physical infrastructure of the train, including locomotives, coaches, and other operational components, remains in the hands of Indian Railways. However, the services provided, such as ticketing, refunds, parcels, catering, and housekeeping, are outsourced to IRCTC. This separation of infrastructure and operational services allows for more flexible and efficient train management.

Components of Corporate Train Model

The Corporate Train Model is composed of three key components, each with its own set of charges:

Haulage

IRCTC pays the haulage charge or operational charges to move a rake, which includes the cost of locomotives, pilot coaches, track signaling, and other related operational expenses. For instance, the salary of a locomotive pilot and the cost of track signaling fall under this category.

Lease

IRCTC also pays lease charges on the rake to the Indian Railways Finance Corporation. These charges cover the cost of leasing the train infrastructure, including tracks and facilities. Private players may not need to pay these lease charges as they are expected to bring their own rolling stock.

Custody

IRCTC pays a per-day custody charge for the upkeep of the rake. For the Lucknow Tejas Express, for example, IRCTC pays approximately 2 lakhs (200,000 INR) per day for the custody of the train. This cost is incurred even if the occupancy is below expectation and the train is not performing well commercially.

Financial Implications

IRCTC has to pay a total of around 14 lakhs (14,000,000 INR) for the Lucknow Tejas Express to run in a single day, accounting for haulage, lease, and custody charges, plus a profit margin. This cost is a fixed expense, meaning it must be paid regardless of the train's profitability. Private players may avoid this cost by bringing their own rolling stock.

Quality and Investor Considerations

As a corporate entity with a Board of Directors and investors, IRCTC is particularly concerned about the quality of the coaches it receives from the railways. New and well-maintained coaches are crucial for business success. Poor quality coaches can lead to customer dissatisfaction and loss of revenue.

Benefits and Future Projections

One of the significant benefits of this model is that Indian Railways does not have to bear the losses associated with operating these trains, which are often due to low fares and high operating costs. The Indian Railways is expected to benefit from increased passenger traffic as more capacity frees up on conventional lines due to the operationalization of two dedicated freight corridors over the next five years.

Future Demand and Expansion

To meet the growing passenger demand, Indian Railways currently runs around 13,000 passenger trains daily. An additional requirement of 3,000-4,000 trains is estimated. The Corporate Train Model is seen as an efficient way to manage this expanding network, allowing both public and private entities to contribute to the railway system's growth and modernization.

Source: Indias Corporate Train Model - Study IQ by Vironika. Images: Google.

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