Should Indian Railways be privatized ? Looking up the answer to this question on the Internet would lead one to conclude that no, it should not be privatized. I am not convinced, I think it should be privatized.
Lets look at the arguments against privatization, one by one.
- It is not clear how it will improve situation
The argument is that privatization and increased competition will improve the quality of service, drive down prices and spur innovation. It should reduce corruption and force employees to do their best. For a government owned company the employees have no reason to work hard, treat its customers well and figure out how to make everything better. They get paid regardless. This causes them to mistreat their customers and generally be lazy about their work.
The Indian Railways lost ₹30,000 crore (US$5 billion) in 2015. This is despite the fact that it is a high demand business with a government sanctioned monopoly. Booking a train ticket is so painfully difficult that it a subject of so many degrading memes on the Internet. The compartments are noisy and sleeper classes are filled with bed bugs. The toilets are dirty. The staff is unpleasant to deal with. The train stations are riotous and unclean. It smells of shit and urine.
I wonder how many levels of incompetence it takes to suck so badly at a job.
Privatization has helped the Indian telecommunication sector and aviation sector. It is possible for it to work in the rail industry as well. Even if it doesn’t help, it is at least worth a try.
- Look at the state of American and British Railways
They are significantly better, aren’t they ? But even if it isn’t, there are a thousand reasons it could work better in India. Yes, I know there are a thousand reasons why it couldn’t work also. But why not give it a try ?
Concerning America, their landmass is 3 times that of India and they are a very affluent and urbanized country. This means that most of the travel is very long and hence very inconvenient to be conducted by train. So rail is used mostly for goods and human beings pay a little more to travel by planes.
- It is a natural monopoly due to high cost of entry and exit
This is partially true. The high cost of entry and exit is largely due to high cost of building and operating railways, so we may need to have some government assistance with regard to this.
One solution to this problem is to let the rails themselves be owned by one company and combine this with multiple companies owning the individual trains. The train companies lease the rails from the rail company to provide their service.
Sure, some government assistance will be needed to acquire more land, ensure that there is stiff competition etc but these are all problems that have well known solutions. It can definitely not be a fire and forget endeavor.
Also I don’t understand how it becomes harder for individual investors to exit the rail business as most companies are traded on the public stock market. If you want to enter the rail business buy a few shares of the company at the Mumbai Stock Exchange. Want to exit ? Sell them at the stock exchange.
- Some routes may be under serviced because they may be unprofitable
Form a government company to service only these routes using tax payer money. There is no need to keep the entire business in the public sector and cause incalculable misery to everyone in India to benefit a few.
- The railway employs a lot of people these jobs may be lost in privatization
Privatization does not automatically cause loss of jobs. If a private railway business can operate with fewer number of people and automate away a lot of these jobs it would benefit the customer with lower fares. This money saved by customers can be used to buy new things which creates new jobs. See the parable of broken windows. Another possibility is to tax the rail companies and pay unemployment benefits to these people directly. At least the public will be spared from their laziness and callousness.
- Defense concern. Countries like China could buy up all Indian Rail businesses and in the event of a war, discontinue them all
We can repossess these businesses in the event of a war. The other problem is if they sabotage it silently while they are holding it. This problem can be solved by stronger policing.
- National pride and unity
A lot of arguments center around how Indian Railways is a matter of pride for Indians. Sorry, I would rather travel comfortably than with pride. Also, I don’t think it is a matter of pride given how absurdly mismanaged it is.
So anyway, I think most of these arguments are bogus or ill-informed. I have similar thoughts about the power industry ( power cuts are uncommon in Western countries ) since there is no innovation in solar, wind, nuclear power in India despite us having no serious oil reserves. I think India is a poor country on account of power. But more on that later.
What do you think ? Let me know in the comments section.