Halting of Tejas Express raises doubts on viability of private trains

According to officials close to the development, the major reason for low occupancy is the fear of travel due to the pandemic
At a time when the auction for private trains is entering the stage of domestic companies getting short-listed, the prototypes of these private trains run by the Indian Railway Catering and Tourism Corporation (IRCTC) are halting operations due to low occupancy.

IRCTC has said the Lucknow-New Delhi Tejas Express will suspend operations from November 23 and the one on the Ahmedabad-Mumbai line will remain cancelled from November 24.

This has raised doubts among players on whether the upcoming private trains will be viable because it requires at least 70 per cent occupancy on each trip to run without losses though some see this only as a temporary setback. The Ahmedabad-Mumbai route is seeing around 25 per cent occupancy and Delhi-Lucknow 35 per cent, which is the reason why the services are going to be halted. “For every trip, IRCTC will have to spend Rs 15 lakh and lease charges. To recover this, they need 70 per cent occupancy. This will be a huge concern for a private player,” said an industry player.

The Lucknow-New Delhi Tejas Express started operations on October 4 last year, and the Ahmedabad-Mumbai train on January 19 this year. Due to the pandemic, the operations, suspended since March, resumed on October 17.

According to officials close to the development, the major reason for low occupancy is the fear of travel due to the pandemic.

The Indian Railways is set to come up with 151 private trains on 109 routes at an investment of around Rs 30,000 crore.

Private players will invest around Rs 200 crore a train. It is expected to be a tough battle for private players because they will have to compete with the heavily subsidised Indian Railways.

The Indian Railways is recovering 57 per cent of the cost of travel in the passenger segment, while on suburban routes the recovery comes to around 40 per cent. Based on the latest estimates, the railways is charging around 36 paise for 10 km per passenger, while it spends around 73 paise for the same distance.

“The impact of the pandemic on passengers has been significant; people are travelling only when it is very necessary. This will change in the next two quarters. Private trains are coming only in 2023-24, and the entire industry feels it will come to normalcy by then,” said Jagannarayan Padmanabhan, director and practice lead, transport, CRISIL Infrastructure Advisory.

Train manufacturers, which are banking on business opportunities in private trains, too, continue to be upbeat.

“The situation is only due to Covid. We see huge potential as suppliers of trains. We expect the bidding process to be over soon and get a lot of orders from the potential players,” said Subrat Nath, MD of Spanish manufacturer Talgo’s India arm.

Padmanabhan, however, said just relying on ticket revenue for breakeven was not going to be the strategy for private players.
“They will look to get a higher wallet share of travellers through means other than fares,” he added.

At least 13 players were shortlisted by the Indian Railways for operating private trains in 12 clusters. The operators will be selected after the requests for proposals are submitted with a revenue share quote.

The companies in the fray include GMR, Indian Railway Catering and Tourism Corporation (IRCTC), L&T Infrastructure Development Projects, Bharat Heavy Electricals, and Welspun Enterprises.

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