The review process is due to begin in September and will be completed before the end of the fiscal year.

The move comes amid protests by rail unions against the Ministry of Railway’s moves to privatise rolling stock manufacturing.

“The stick of retrenchment was being held out by the incumbent National Democratic Alliance (NDA) government to compel the unions to fall in line with the privatisation agenda that the government has set for itself,” says All India Railwaymen Federation (AIRF) general secretary, Mr Shiv Gopal Mishra.

While the circular itself, issued on July 27, does not list specific targets, the Indian government is expected to reduce the size of the workforce to 100,000 employees within a year.

Following the return of the Mr Narendra Modi-led NDA government after national elections in April and May, railways minister Mr Piyush Goyal has submitted plans to permit private companies to operate passenger trains on two select routes as part of the ministry’s agenda for the first 100 days. Amalgamating and privatising IR’s rolling stock manufacturing units is also a priority for the government.

IR’s plans to allow a private operator to run a passenger service on the New Delhi - Lucknow route were scuttled last month following protests by rail unions. The ministry has now relented, having decided trains on the Delhi - Lucknow and Mumbai - Shirdi routes will now be operated by the Indian Railways Catering and Tourism Corporation (IRCTC).

The Modi government’s second term has coincided with protest demonstrations and sit-ins by employees opposing perceived moves to privatise profit-making units such as the publicly-owned coach manufacturing factories at Rae Bareli, Kapurthala and Chennai.

Ministry officials say the staff retrenchment plans were unconnected with strategies to “tame the unions,” pointing to an internal study from March 2017 which recommends a 1% reduction in staff strength which would result in savings of around Rs 3bn ($US 42.4m) annually.

According to the report, the employee wage bill for 2016 constituted 63% of IR’s total expenditure. As a strategy to cut excessive spending, the committee recommended a voluntary retirement scheme for senior employees. In the past, several committees have recommended staff reductions and the unbundling of services as a strategy to improve professionalism in the company.