Indian Railways' plan to generate Rs 390 bn from non-fare tenders derails

The cancellation of the tenders came when the Railway Board withdrew the powers of awarding contracts from railway subsidiary RITES and gave them to railways zones

Shine Jacob | New Delhi Last Updated at April 17, 2018 

Indian Railways | Representative Image

The Indian Railways’ plans to generate Rs 390 billion from non-fare sources over 10 years have become doubtful, with the national transporter withdrawing tenders for out-of-home (OOH) advertisements and advertisements on trains owing to a “low industry response” and “technical reasons”.

OOH included station areas, overbridges, underbridges, level-crossing gates, railway colonies, workshops, production units, and railway land along tracks. These initiatives would have added at least Rs 82.5 billion to its revenues over 10 years.

According to sources close to the development, the cancellation of the tenders came when the Railway Board withdrew the powers of awarding contracts from railway subsidiary RITES and gave them to railways zones.

With this, the railways will go back to its practice of inviting tenders for “sundry” initiatives through the zonal railways. “This has led to stagnation in policies for at least two years, resulting in huge revenue losses to the railways. It may take another one year for revenues to come in if the zones start issuing tenders,” said an industry source.

According to the data available, cancelling tenders for advertisements on trains and out of home and setting up automated teller machines (ATM) in stations under the Central Railways led to a huge shortfall in expected revenues from advertisements, publicity and parking earnings of the railways in 2017-18.

As compared to a revised target of Rs 8.5 billion (from non-fare sources) for the financial year, the railways could manage about Rs 1.5 billion up to January 2018. The reason for this is the delay in finalising tenders for content on demand and the Rail Display Network (RDN) by RailTel, another subsidiary of the railways.

The RDN was considered one of the most lucrative initiatives of the railways in recent times and it would have generated Rs 150 billion over 10 years, while content on demand would have added another Rs 60 billion.

“Even though 17 notices inviting tenders were invited (under this), the industry response was negligible. Following this, on March 22 this year, the bid process management was withdrawn from RITES and given to the zones,” said a source close to the development.

Similarly, zones got the job of advertising management on mobile assets on February 16.

This includes advertisements in trains and also on them.

With this, the policy of centralising non-fare initiatives taken by Suresh Prabhu when he was railways minister has been rolled back. As a step towards this, a separate directorate for non-fare revenues had been set up in May 2016. In order to streamline advertising-related aspects of the railways, this directorate later became part of the tourism and catering divisions after Piyush Goyal took charge of the ministry.

In 2018-19, the railways is targeting revenues of Rs 12 billion from advertising. This is based on tenders to be issued for content on demand, the RDN and application-based cab services at railway stations.

Application-based cab services are likely to bring in Rs 30 billion over the next 10 years. Uber, Ola, Baxi, Shuttl, Meru, and BlaBlaCar are expected to participate in them.

Inside Track

Business/market potential of new NFR initiatives (10-year time period) (Rs billion)

·Out Of Home60

· Train ads22.5

·ATMs22.5

·App-based cab services30

·Content on demand60

·Integrated mobile apps45

·Rail Display Network150

·Total revenue390

Source: Indian Railways