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PPP in Railways

Indian Railway has proposed Rs 8.56 lakh crore investment plans for the next 5 years and the national transporter expects to execute a sizable chunk of projects through Public-Private Partnership and in collaboration with states.

Areas where private participation can be done:

a. Indian railway is suffering from low investments, poor capacity, congestion, low speeds, poor conditions of railway stations.

b. The budgetary resources are not sufficient to make up for the investments required.

c. PPP approach can be used to transform the railway in different areas comprising from ticketing, station construction and upkeep, rolling stock manu-facturing, signaling etc.

d. Bibek Debroy committee has also said that PPP mode can be utilized for mobilizing finances.

Benefits

a. Opens opportunity for returns from investment in Rail Projects.  

b. Augmentation of railway infrastructure and decongestion of the railways.

c. Ensure timely availability of Rail Infrastructure to the beneficiaries viz. Port, Industry and States.

d. Better maintenance and efficiency in implementation of projects.

e. The PPP projects in case of airports have shown that this mode greatly helps in improving quality of services.

Challenges that is likely to come:

a. Absence of independent regulator in the railway sector. In its absence there are chances of litigation or other issues as cropped up in road sector.

b. No past experience in the PPP model for implementation of projects for Railways.

What are the different models of PPP for Railways?

According to the official, the participatory policy for rail connectivity was launched in 2012 which has 5 models including 

1. Non-government Railway Model, 

a. This model shall be applicable to 1st and last mile connectivity projects at either end of the rail transportation chain providing connectivity to ports, mines, logistics parks or large- sized cluster of industries, which are handling goods traffic for multiple consignors or consignees.

b. These railways will be operated on “common carrier” principle for public transportation of goods and passenger.

c. In this model land acquisition, development, construction, maintenance everything will be done by private player.

d. Operations and revenue collection will be done by Indian Railways.

e. Freight revenue will be collected by Indian Railway and apportioned to the Non-Government Railway as per Inter Railway Finance Adjustment

f. As the project line is on private land and the assets are fully private infrastructure, it will be transferred to IR in case of violations of specified terms of agreement at terms set out in the Agreement or by mutual consent at such terms as may be mutually agreed.

2. Joint Venture Model, 

a. In this model SPV is created which carries all the work starting from project finalization to operations and maintenance. The Operations & Maintanance can be done by Indian Railway.

b. This model is to be used for commercially feasible and bamkable projects.

c. Revenue realization for SPV will be through apportionment of freight charges.

3. Build Operate and Transfer Model, 

a. This model shall be applicable to the sanctioned Railway projects where it is not possible to identify a stakeholder or strategic investor

b. Who can take a lead in making investment in the project line. 

c. The projects under this model will generally be long rail corridors carryingtraffic generated from various streams. 

d. These will be sandwiched sanctioned new line and gauge conversion projects or dedicated freight corridors.

e. In the absence of strategic investor, selection ofinvestors will be done through competitive bidding process.

f. The Net revenue payable to the concessionaire shall be fixed at 50% of the gross apportioned revenue.

4. capacity augmentation with funding provided by Customers Model 

a. For doubling/multiple line projects where some customers are beneficiaries of the capacity addition and may be interested in funding the project for expeditious completion/commissioning.

b. Construction, operations and maintenance will be done by Railways.

c. Railways will pay 7% of the amount invested through freight rebate on freight volumes every year for 30 years or till the funds provided by the project beneficiary is recovered, whichever is earlier.

5. Capacity Augmentation through Annuity Model.

a. This model is applicable to sanctioned doubling, 3rd line and 4th line projects where it may not be possible to find funding from any specific user.

b. The concession would be for financing and construction.

c. The concessionaire would be paid through annuity for limited predetermined period. Annuity will be determined through competitive bidding  Annuity payments will be budgeted and paid on a committed basis.

Projects completed through PPP in railway

During 2002 and 2014, 8 port connectivity projects worth about Rs. 3153 crore were implemented. These covered the linking of Mundra Port and Pipavav-Surendranagar, Hassan- Mangalore, Gandhidham-Palanpur and Bharauch-Dahej gauge conversion projects.

 

 

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