Vantage point

Wednesday, August 09, 2006

More about Railway Station Privatisation

Why should we privatise the railway stations at all?

Well, firstly, the government has no business running business and that itself should be a big enough reason.

But even looking at it from a utilitarian perspective, because life will be much better for all parties concerned. So from the utilitarian perspective, should ALL stations be privatised? Nope. At least not right away. Let us start from big stations which have footfalls numbering in multiple thousands. Delhi, Pune, Chennai, Bangalore, Kolkata..... big cities where the central location is a big plus for retail and restaurant businesses. Pune is the only station I have been to which has used its space in such a way and a vast majority of customers at the station coffee shop are non-travellers.

Bombay is a different case and I feel that most of the suburban train stations there too have this potential. There are a few small outlets at the Churchgate station and these outlets have many times more customers at any given moment than the Western Railways Canteen right there. But admittedly, all the customers are commuters stopping by for a bite.

A private company running a railway station with huge footfalls will have two main sources of revenue.

One will be the advertising of course. Even now we see at least suburban stations in Mumbai having several hoardings and posters. The second will be leasing out the space to eating joints or retail outlets. The second source of revenue will act as a natural counter-check against too many hoardings cluttering the station. Because to attract customers, they will have to ensure that the ambience is not intrusive and ugly. Think of malls. There is a lot of advertising in malls, but never so much that you will feel besieged by the ads. For the simple reason that if you dislike the atmosphere, you will take your business to a more pleasing place.

Look at any city centre in India. Any building is multiple storeys, to maximise the use of the prime real estate. The sole exception are the railway stations which are almost exclusively single storey. Even the few stations that are multiple storey, actually house railway offices. The multiple storeys could be the place where these businesses could be set up.

These businesses would of course exclusively target non-travellers. But a private company would also have incentives to maximise revenues from travellers. Stalls on platforms would be a lot posher. They would not earn as much as their cousins upstairs but would definitely be able to rake in more than what the railway-run kiosks currently do.

There will be problems of course. Streamlining the flow of people, parking spaces, access issues, etc. Especially in Bombay's stations. But a private company entering the business to make money would do so after ironing out these kinks, as opposed to a governmental body which works for the "public good", one of the most specious terms ever coined.

A reader wrote in to me talking about the Vashi railway station which is already quite versatile. It has various outlets, is clean, and even has several private offices in it. Indeed, many stations along the Harbour Line in Mumbai are like that. In fact Kharghar station has parking on the second floor, an "innovation" very rare in India. All these stations were built because of a few good men who happened to be in charge. By throwing many of our big stations open to the private sector, we can ensure this efficiency by and large regardless of the people in charge.

What about the small stations? The ones which do not have as many footfalls. I do not have a utilitarian framework on their privatisation will exactly pan out. But I am sure whatever earning potential they have will be maximised under private ownership rather than state-ownership.

Today the government's biggest expenditures are subsidies and wages. The wage bill is huge, keeps growing, thanks to multiple pay commissions. This government is keen on burning money in the name of social sector schemes. Well to burn money there, they have to stop burning money somewhere else, right? At the moment railway stations, with lakhs of unionised employees working in a business with misaligned incentives are a major bonfire for that public money.

So at least in the interest of burning money in newer hare-brained schemes ostenibly aimed at social justice, the government would do well to consider privatisation of railway stations.