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Q. Railways and Power: Discuss the issue of Indian Railways plan of purchase agreements.
Jun 21, 2017 Related to : GS Paper-3

Ans :


Recently railway ministry unveiled Mission 41K to save Rs 41,000 crore on the Indian Railways' expenditure on energy consumption over the next 10 years. This target will be achieved by taking a slew of measures which include moving 90% of traffic to electric traction over diesel. Presently, this is at 50% of the total rail traffic.

Indian Railways is looking to cut down its power cost through purchase agreements with independent power producers. Indian railways have approached to various independent power producers in this regard. But unfortunately many state governments to protect their earnings, making delay to issue no-objection certificates to independent power producers to supply power to railways.

How proposed move brings down the cost?

  • The Railways procures power for traction at an average rate of ₹6.7 a unit, whereas power from independent producers is available at tariffs between ₹3.69 and ₹5.5 a unit. 
  • Indian Railways consumes about 2,500 MW for its operation and this demand is only set to increase as more tracks are electrified and train trips increase. That will also lead to ballooning of the Railways’ electricity bill, which is already ₹12,000 crore a year.
  • The purchase agreements with independent power producers, who supplies power at lesser rate will save up to ₹5,000 crore annually to Indian railways.


  • Indian railways planned purchase agreements with independent power producers is a smart move. Any commercially run organisation, irrespective of whether or not it has social obligations, should seek to cut out wasteful expenditure and seek lower cost suppliers in order to become competitive. 
  • The India Railways, like every service funded by taxpayers’ money, needs to become more efficient, improve its operating margin and generate enough resources to replace ageing assets and invest in expansion.
  • If independent power producers are able to supply power to Indian Railways, then it will reduce the operation cost and helps to increase the efficiency by investing this saved money in its expansion.


Availability of cheaper power will be boon for any industry, particularly to those which needs huge quantities of power like Railways. The planned purchase agreements with independent power producers of Indian railways is good move and saves more than ₹5,000 crore per annum to railways. Hence state governments must issue no-objection certificates to independent power producers to supply power to railways. Such move will improves the quality of service and helpful to all stakeholders of Indian Railways. 

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