India's Railways Isn't Failing. Making It "Profitable" Might.

Indian Railways isn't a business. It's an organ of the country. Every day, 23 million people board trains across over 7,000 stations. That's more than the entire population of Sri Lanka — every single day. And 99% of them are poor or middle-income passengers traveling in sleeper and unreserved coaches.

These aren't leisure travelers choosing between airlines and trains. These are migrant workers carrying their lives in cloth bundles. Students traveling from small towns to exam centers. Daily-wage laborers who can afford a ₹200 general ticket but not a ₹2,000 Tejas seat. For them, the railway isn't a service — it's the only way to reach where the work is.

And they already paid for it. Indian Railways receives ₹2.52 lakh crore annually from the Union Budget — money that comes from taxes collected from every Indian, whether they ride a train or not. The entire railway network — 68,000 km of track, 13,000 trains daily, every station, every signal — was built and is maintained with public money.

The Tejas Express was supposed to prove that private operation works. The reality is more complicated.

There's a detail that gets buried in the "first private train" narrative: IRCTC, the operator, is a 62.4% government-owned subsidiary. The train runs on government-owned tracks, uses government-owned locomotives driven by government employees, with security provided by the RPF. The "private" part was ticketing and catering. It was a public-sector company running on public infrastructure.

And here's what the ₹63 crore "loss" actually looks like when you follow the money:

IRCTC pays Indian Railways ~₹14 lakh per day in fixed charges — haulage, coach lease, and custody fees. These are payable regardless of occupancy. COVID halted the train five times between 2020 and 2022. The coaches sat idle in yards. No passengers. No revenue. But IRCTC still paid. Indian Railways collected its fixed charges on trains that weren't running.

The ₹63 crore didn't vanish. It moved from one government entity (IRCTC) to another (Indian Railways). IRCTC's loss reduced its profitability, which reduced dividends to its majority shareholder — the Government of India. The taxpayer bore the cost either way. The only thing the "corporate model" achieved was moving the loss off Indian Railways' balance sheet and onto a subsidiary's.

Then came the next step: a tender for 150 private trains on 109 routes. Private companies would bring their own rolling stock, hire their own crew, and run trains alongside Indian Railways' services. The terms were clear: take the profitable routes, pay a fee to the government.

Only two entities submitted bids — IRCTC (a government subsidiary) and one private infrastructure company. Not a single major private railway operator from India or abroad showed interest.

The risk was too high. Who wants to invest thousands of crores in trains when the government controls the tracks, decides the schedules, and can change policy anytime? The tender was scrapped and re-evaluated in 2021. By 2025, the government revised the plan with softer terms. But the fundamental question remains: if the market itself largely rejected the model, what has changed?

To understand what could happen to Indian Railways, you don't need to look at Japan or England. You just need to look at your phone.

In the early 2000s, BSNL was India's largest telecom company. Government-owned, present in every corner of the country, from Kashmir to Kanyakumari. It had cash reserves of ₹29,300 crore. It was not just solvent — it was thriving. Market leader. Growing.

Then came a series of policy decisions that, taken individually, looked routine. Taken together, they form a pattern:

The pattern is clear: give private operators a head start, deny the public company resources to compete, drain its reserves with forced payments, then point to its declining performance as proof that privatization is necessary. And after the public operator is crippled, spend even more public money — ₹1.64 lakh crore — trying to revive it. The cost of the "rescue" exceeded the cost of simply letting BSNL compete on a level field.

No one is saying the outcome is predetermined. But the playbook — the sequence of steps — is recognizable. And the last time India ran this playbook in a major public infrastructure sector, the public operator went from market leader to irrelevance in 15 years.

This is the question that never gets asked in privatization debates, and it's the most important one.

Indian Railways is funded by taxpayer money. The ₹2.52 lakh crore annual budget comes from taxes paid by 1.4 billion Indians — whether they ride a train or not. This isn't a loan. This isn't borrowed money. It's a shared national investment in infrastructure, like roads, like defense, like public schools.

Every year, Indian Railways provides a subsidy of ₹56,993 crore on passenger fares — effectively offering a 46% discount on every ticket. The operating ratio is 98.22%, meaning Railways spends ₹98.22 for every ₹100 it earns. Critics call this "inefficiency." But consider what it means: the railway system runs at near-cost for 23 million daily passengers, most of whom are poor.

Is that waste? Or is that the whole point?

Think about it this way. Your municipal corporation — MCD, BMC, whichever city you live in — collects garbage, maintains roads, cleans drains, runs streetlights. It runs entirely on taxes. Nobody asks: "Is MCD profitable?" If they do their job efficiently, that IS the success. The "profit" is a clean city, not a number on a balance sheet.

Railways works the same way. The "profit" isn't revenue minus cost. The profit is a student from Gorakhpur reaching an exam center in Delhi. A daily-wage labourer from Bihar reaching a construction site in Mumbai. A family getting home for Diwali. When 23 million people can move across the country for ₹200, they work more, earn more, save more, spend more — and that spending powers the economy of every city they reach. The ₹56,993 crore "subsidy" isn't a loss. It's the fuel for an economic engine that generates many times that in GDP.

Imagine, for a moment, if train travel were free. Students travel to better colleges. Workers reach higher-paying jobs. Families don't choose between a train ticket and a week of groceries. The "cost" on the railway's books would look terrible. But the economic activity it would generate — the wages earned, the businesses supplied, the taxes paid by more productive workers — would dwarf the subsidy.

Now consider what happens when you try to make railways "profitable":

The citizen pays twice: once through taxes to build and maintain the infrastructure, and again through premium fares to ride on it. The private operator's "profit" comes from extracting additional revenue from infrastructure the public already funded. And the routes nobody wants — the ones serving small-town India, the migrant corridors, the lines to Lalkuan and Chhapra and Katihar — stay with the government, running at a loss.

This is not an abstract concern. It's exactly what happened in British telecom, British railways, and Indian telecom. The profitable parts get taken. The unprofitable parts stay with the public. Then the public sector is called "inefficient" because it's only running the routes nobody else wanted.

Every country that has privatized railways learned something. The question is whether India is learning from them or ignoring them.

Japan's railway privatization is the success story everyone cites. But look at the structure: JR East, JR Central, and JR West are regional monopolies. They don't compete with each other on the same tracks. Each company controls its region, and diversifies revenue into real estate, retail, and hotels around stations. JR East's property business generates nearly as much revenue as its train operations.

India's model is the opposite. Private and government trains run on the same tracks, on the same routes, competing for the same passengers. But the government train carries 99% poor passengers at subsidized fares, while the private train charges a premium. This isn't Japan's model — it's cherry-picking the profitable cream and leaving the unprofitable milk with the public.

The UK privatized its railways in 1993 with great optimism. Thirty years later, the Labour government began renationalizing them in 2024. What went wrong? The track-and-train split meant nobody had full accountability. Private operators squeezed costs, service quality declined, fares rose faster than inflation, and the government ended up paying twice the pre-privatization subsidy level. Network Rail accumulated £30 billion in debt — all public money.

Transport Secretary Heidi Alexander's verdict in December 2024: "We've had private train-operating companies running services in this country over the last few decades, and it clearly hasn't worked."

The government's original 2020 plan for 151 private trains was shelved after poor response. A revised version with softer terms is being pursued. The target routes remain the same: premium intercity corridors currently served by Rajdhani, Shatabdi, and Vande Bharat — the profitable routes that cross-subsidize the loss-making rural lines.

Here's what's at stake:

The freight cross-subsidy is the load-bearing wall of Indian Railways' financial structure. Freight generates approximately 68% of gross traffic receipts, and those profits cover the losses from passenger services. But if premium passenger revenue gets siphoned off by private operators, the remaining government trains become even less financially viable — making the "loss-making" narrative a self-fulfilling prophecy.

Here is the arithmetic that doesn't appear in any policy document:

Payment 1: Every Indian pays taxes. A portion goes to the railway budget — ₹2.52 lakh crore this year. Whether you take a train or not, you funded the tracks, the stations, the signals, the bridges, the level crossings, and the salary of every railway employee. This is a social contract: you pay for infrastructure, and the nation gets mobility.

Payment 2: A private operator enters. They use the same tracks you paid for. The same stations. The same signals. They charge you 20-30% more than the government train for the same journey. And they keep the profit.

If that profit were funding better rural connectivity, or new routes, or cheaper fares for the poor — you could argue it's worth it. But the profit goes to the operator. The rural routes stay with the government. The poor stay in unreserved coaches. The only thing that changed is that someone is now making money on infrastructure you already built.

The global evidence is clear: every major economy subsidizes its railways. China spends $130 billion (see how India's investment pledges compare to reality). Europe spends €73 billion. Even Japan, the poster child of railway privatization, built its entire high-speed rail network with government funding before privatizing the operations. Switzerland, consistently ranked the world's best rail system, is 49.5% publicly subsidized.

The idea that railways must "pay for themselves" is not supported by any major economy's practice. It is an ideological position, not an economic one.

What the evidence does show is that how you privatize matters more than whether you privatize. Japan gave private operators regional monopolies and the freedom to diversify into real estate and retail. The UK split track and operations, creating a system nobody was accountable for. India is trying something no country has attempted: competition between private and public operators on the same government-owned tracks.

The risk isn't privatization itself. It's the specific model: one where the public operator keeps the unprofitable burden, the private operator takes the profitable cream, and the taxpayer who funded everything gets charged twice for the privilege.