Those among us who have studied even BASIC economics know why monopolies, in any sector, aren’t beneficial for the various stakeholders involved (customers, bureaucrats, nation’s poor, and national economy). Monopolies are the “antithesis” of competition. They often maintain high prices and have no incentive to innovate or to provide efficient services.
In the case of Indian Railways, perhaps the high prices argument doesn’t apply. That’s because it artificially tries to maintain low fares in the name of serving the poor. Who cares if, in the process, it incurs huge losses (ultimately borne by us taxpayers)! Who cares if maintaining low fares translates into third-class services i.e. lousy IRCTC website, unclean stations, ramshackle train wagons, sluggish booking processes, the list goes on.
Oh, and did I mention chronic corruption? It’s no secret that corruption is endemic in almost all nationalised sectors of the Indian economy. Don’t get me wrong! I know corruption is also found in the private sector. But what differentiates the private sector from a public (i.e. govt.) sector is that in the former the corrupt actually get punished, while in the latter the corrupt get promoted. Or to put in another way, “When a private business fails, it’s closed down. When a govt. business fails, it is expanded.”
The benefits of privatisation are endless. To get straight to the point, let me enumerate a few advantages of privatising Indian Railways:
(1) Not surprisingly, railways are one of the the cheapest and fastest means of transport. Currently, Indian Railways is lacking TONS of wagons to support the demand of freight transportation. We must remember that the economy of a country rests on the growth of its businesses, which increase employment and thus indirectly reduce poverty. Given the lack of enough wagons, businesses that want to transport their goods from one place to another have only two options (1) wait for months or (2) choose the more expensive and slower option of road (truck) transportation. Thus, this inability of railways to meet the growing demand of freights translates into lower productivity of our businesses.
(2) The cycle goes on: Lower business productivity in turn causes lower output –> lower profit –> lower wages –> lower employment –> and thus more poverty. You can now see how Indian Railways is also one of the many reasons that explain why Indian businesses are not able to compete on a world-level.
(3) When businesses choose road transportation (instead of railways), they cause oil imports to rise. This adds to the rising deficit of our economy.
(4) We have already seen privatisation in airways, barring Air India of course. It works amazingly! Airline ‘fares’ are one of the MOST competitive. In fact, ask any informed businessman and he’ll advise you to stay out of venturing into an airline business — there’s so much cost-cutting and price wars in this industry that most airlines literally struggle to maintain profits. And while Kingfisher stands on the brink of bankruptcy, Air India keeps on expanding despite the fact that BOTH are failing businesses.
So, if airlines can be privatised, why not railways! I bet that privatisation will drastically improve the condition of our stations, wagons, and services — and not to mention fares as well. Competition inevitably leads to low prices, innovation, efficiency, and world-class customer service. This is the basic premise of economics. We only have to make sure that privatisation is complete, meaning it is not solely and favourably given to only a few select companies — like it was done in the 2G auction. Else, we shall soon see cronyism (the evil nexus between govt. and top businesses) in this sector too.