It's not very tough to understand why the railways is running in losses. It may be the only commercial entity in the world which favours private manufacturers to make coaches without fully utilizing the capacity of its own departmental factories which were set up at huge cost.
The policy adopted during UPA-2 to attract private players in coach manufacturing is interesting. First, the transporter awarded contracts to West Bengal-based private manufacturers, then it forced departmental production units to share the design for coaches for suburban and express trains free of cost to these private entities.
If this was not enough, railways, reeling under huge financial stress, bought coaches from these manufacturers at 12% higher cost than that incurred by its own manufacturing units - Integral Coach Factory, Chennai and Rail Coach Factory (RCF), Kapurthala.
The railway board was encouraging private players at the time it was pumping huge money into setting up departmental coach manufacturing factories. Rae Bareli coach factory was set up at a cost of around Rs 2,500 crore while several other such units are in the pipeline in West Bengal, Kerala and Karnataka.
Documents with TOI suggest that the board went ahead and awarded work to private companies despite several objections by senior officials regarding sharing of technical know-how of coach manufacturing with private players free of cost and high cost of procurement.
Another interesting fact is that the entry of private players in coach manufacturing allows railway board to have financial control and authority over tendering process while in case of departmental production, general managers (GM) had authority.
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