Budget 2026: Strategic Privatisation Is At The Core Of Railway Reforms

On multiple occasions, the Prime Minister has underlined a simple but powerful principle of governance: "the government has no business to be in business". Nowhere is the gap between this stated intent and actual practice more evident than in the functioning of the Indian Railways.

Revisiting Reform Rationale

Nearly three decades ago, the Indian Railways began creating Focused Business Organisations (FBOs) to hive off non-core activities and introduce commercial discipline. These entities, which are termed as railway Central Public Sector Undertakings (CPSUs), were conceived as a transitional reform, or a stepping stone towards market orientation.

Over time, however, this transition stalled. Instead of gradual privatisation or strategic disinvestment, most CPSUs have remained firmly under state control, even as the broader policy environment shifted decisively in favour of disinvestment and private participation. And yet, the Ministry of Railways continued to create new CPSUs, deepening bureaucratic involvement in commercial activities.

This persistence stands in clear contradiction to the Prime Minister’s repeated articulation that the role of government is to enable, regulate, and safeguard public interest, and not to run businesses.

Captive Markets, Yet Modest Outcomes

The consequences of this contradiction are visible in outcomes. Most railway CPSUs remain largely government-owned, have assured access to railways business, and operate in markets with limited competitive pressure. Unsurprisingly, their growth has been incremental rather than transformative, even in sectors such as logistics that are otherwise witnessing rapid expansion.

When ownership, regulation, and the customer are housed within the same ministry, efficiency and accountability take a toll. Decisions tend to prioritise administrative convenience over market responsiveness. Innovation is constrained, and risk-taking is discouraged. Over time, this structure imposes hidden costs: missed opportunities, slower growth, and weaker competitiveness.

Container Corporation Of India (CONCOR)

The prolonged indecision over the strategic disinvestment of the Container Corporation of India (CONCOR) illustrates these costs most glaringly. Despite multiple announcements and formal Cabinet approval for the strategic sale of 30.8% stake with management control, the proposal has remained “on hold” for years.

This hesitation has sent mixed signals to domestic and global investors, undermining confidence in India’s commitment to logistics reform. It has also imposed opportunity costs. CONCOR is a profitable enterprise, recording around 10% volume growth, with over 60 terminals, a large rolling-stock fleet, and integrated first- and last-mile connectivity. It has attracted strong interest from global port operators, logistics majors, sovereign investors, and private equity funds.

That such a high-quality asset remains constrained by policy uncertainty is not prudence, but rather paralysis.

Boosting Market Confidence

Meanwhile, the high land licensing fees reveals the deeper structural issue. The Ministry of Railways simultaneously acts as the landlord, regulator, competitor, and the majority shareholder. Even after revised guidelines were issued in 2023, ambiguity persists.

This conflict of interest would not endure in a competitive market. It persists only because ownership and regulation are intertwined. Strategic disinvestment would force a clean separation of roles, enabling the Ministry to regulate transparently and focus on system-wide outcomes rather than enterprise-level control.

Privatisation, therefore, should not be viewed as asset disposal, but as governance reform.

Budget 2026: Turning Principle Into Policy

Budget 2026 presents a rare opportunity to convert long-articulated reform intent into enforceable policy. If the government is serious about reducing its commercial footprint, this is the moment to demonstrate it through a clear, time-bound commitment to strategic disinvestment in Indian Railways. The prolonged “on hold” status of CONCOR should be formally lifted, accompanied by an explicit announcement of a disinvestment roadmap that includes transfer of management control. Such clarity would immediately restore investor confidence and reaffirm the credibility of the government’s disinvestment programme.
 
More broadly, Budget 2026 should signal a shift towards the sequential privatisation of railway CPSUs operating in competitive, non-core sectors. Rather than episodic announcements, what is required is a structured framework that aligns ownership reform with the Railways’ core mandate. This would allow the Ministry to progressively withdraw from commercial activities while strengthening its role as a system planner, regulator, and safety overseer.

Western Dedicated Freight Corridor

At a time when the Western Dedicated Freight Corridor is operational, rail–port connectivity is improving, and containerisation of freight is accelerating, delaying ownership reform carries a real economic cost. Under professional private management, logistics assets such as CONCOR are well placed to scale rapidly and draw freight away from roads.

Budget 2026 must, therefore, be used to make a decisive break from incrementalism, ensuring that governance reform keeps pace with India’s infrastructure ambitions.

Indian Railways cannot credibly pursue reform while remaining deeply embedded in commercial operations. The Prime Minister’s observation that the government has no business to be in business is not merely a slogan: it is a guide to administrative efficiency in a modern economy.

Budget 2026 must mark the moment when that principle is applied decisively to Indian Railways. Without strategic disinvestment and privatisation, rail reform will remain partial, and India’s logistics ambitions will remain constrained.

(The writer is the president of the Chintan Research Foundation. Views are personal.)