Early bird will rake-in in private trains, says Talgo; plans India manufacturing

KEY HIGHLIGHTS

• Spanish train manufacturer Talgo will invest in manufacturing in India considering the huge market size and high projected growth
• The rolling stock giant says the Rs 30,000 crore rail privatisation project is a very good opportunity and will generate a lot of jobs
• Talgo India Managing Director Subrat Nath says that private operators would get assured passenger traffic which is set to jump to 13 billion a year by 2030
• On the possibility of train operators going for single-class configuration, Nath said it would be trial and error but most likely be multiple class

Early bird in Indian Railways' Rs 30,000 crore private trains project would be the real beneficiary according to Spanish rail giant Talgo. Hence, it intends manufacturing train sets in India under the Make in India plan.

"Whoever is the early bird in this game, whoever takes the risk (because coming to this is huge and cost-intensive and huge risk) is going to be a real beneficiary. These risks are going to bring wonderful returns," Talgo India managing director Subrat Nath told BusinessToday.In in an exclusive interview.

Spanish train manufacturer Talgo has said Indian Railways' move to offer train operations to private players is a win-win for all and the early bird into the business would make a lot of money given the size of the market and projected rise in passenger volume.

Also read: Virgin Trains, Italferr, Indian cos likely bidders for private trains; Bombardier, Alstom to vie for rolling stock

While Indian Railways will get revenue share and fixed charges from private operators, upper class passengers would get better services. Those who cannot afford the ticket to board the private train would have the option to take Indian Railways train. Private operators would get assured passenger traffic which is set to jump to 13 billion a year by 2030.

Talgo India Chief said that the Spanish rail giant has always been very bullish about India.

"That's why we took the risk to do a trial run which was so successful. We know that Indian market offers great talent in terms of workforce and we always look forward to manufacturing in India. This project is a very good opportunity and that should justify Make in India for us. We will generate a lot of jobs," he said.

Asked if trains are designed and manufactured for standard gauge globally while India has broad gauge and hence it could pose a challenge, the Talgo India chief said, "The best thing is that Spain (Talgo's headquarters) is broad-gauge like India."

Also read: Budget airlines-Indian Railways double whammy threatens private trains' profits

"In India, the gauge is 1,676 mm. In Spain it is 1668 mm. So, it is almost the same. There is only an 8 mm difference. We have broad gauge so we can easily get a train. We have been working since we did the trial run. We have always been hopeful that it is going to take time but it is going to be a big market for us. We have been working on this project so it is not difficult for us," he added.

On the possibility of train operators going for single-class configuration, Nath said it would be a trial and error but most likely be multiple classes.

"Railways is slightly different than aviation. Here, there may be people who would like to be in a more comfortable seat and not like to pay more. In the flight, economy class ticket is Rs 5,000 and business class Rs 20,000. In trains it would not be the same, there would be people who will be ready to pay a bit more but not four times to go in a better class and there would be demand for that as well," Talgo India Chief said.

The Indian Railways' Rs 30,000 crore privatisation plan is expected to see some of the global rolling stock manufacturers such as Bombardier, Alstom, Talgo and CAF vying for a share in the pie while both local and foreign firms bidding for operating trains on 109 routes.

Also read: Railways employee unions to protest against privatisation policy

In all, 151 modern trains (rakes) are proposed to be run by private companies. As per Indian Railways, this accounts for about 5 per cent of existing mail and express trains running on its network. The concession period for operating the trains would be 35 years as this is the life cycle of rolling stocks.

As many as 27 local and global private firms including Tata Realty & Infrastructure Ltd, Adani Ports & SEZ, Bombardier, Macquarie, Mitsui & Co, BEML, Alstom, Hyundai Rotem Company had earlier participated in the meeting called by Indian Railways to discuss privatisation of train operations.

Train operations have, however, not always been profitable for private companies. Explaining the rail operations economics, Subrat Nath said that in railways about 90 per cent cost is normally infrastructure.

"Only the 10 per cent cost is for systems (rolling stock). So, if the operator owns the system then they can make money. But if you put infrastructure with it then it is difficult for them to make profit. Normally, the infrastructure should be a gift of the nation to their people because Railways is like an iron chain that holds the country together. The nation should itself invest in infrastructure and give the operator the liberty to have the system and they should only be worried about output," he said.

Also read: Indian Railways seeks private investment of Rs 30,000 crore to run 109 pairs of trains