Saturday, March 2, 2013

Railways reboots PPP programme: An offer that draws big response by private companies

The railways draws powers from the Railway Act of 1989, which touches upon the idea of non-governmental railways to encourage private ownership.
The railways draws powers from the Railway Act of 1989, which touches upon the idea of non-governmental railways to encourage private ownership.
NEW DELHI: This is one green flag that many are not willing to let go of. Within two months of the government issuing a note allowing companies to own and operate private railway lines to transport goods, Indian Railways has received investment proposals worth Rs 1,360 crore, mostly from logistics companies and ports, an official said. He requested anonymity since he isn't authorised to speak to the media.

Two months ago, the Railway Board asked its zonal general managers to publicise the new policy that allows ports, mines, logistics parks, etc, to construct and own private rail lines. So far, ports at Dhamra, Rewas and Astranga have submitted proposals to the railway ministry. Several other companies in the ports and mining segments have also shown an interest in building railway lines stretching over 26-67 km.

This is the first time the ministry has come out with a policy inviting private firms to build and also own private railway lines. Prior to 1947, the railways were aclutch of 42 networks of which 32 were operated by private companies owned by the princely states. After Independence, all of them were nationalised to form what is today known as the Indian Railways.

For many years now, the railways has been plagued by losses, prompting the Centre to try out several models of sharing infrastructure work and revenues with the private sector. A Railway Board member told ETthe senior leadership at Rail Bhawan is now convinced that it would be impossible to meet future requirements for transporting goods through the existing rail network. The new policy, cleared by the Cabinet Committee on Infrastructure, has labeled such "new lines" as "nongovernment railways".

Private players will have to acquire land and build the new lines, and the railways will provide the trains and staff required to run them. A company building a railway line has to meet operational costs and make a payment to the railways while the latter hands over the revenue after deducting a 5 per cent fee.

The railways draws powers from the Railway Act of 1989, which touches upon the idea of non-governmental railways to encourage private ownership.

"Non-government railways could totally change existing business models. As of now, companies need to be situated close to a railway line to cut costs. But since land prices have escalated, this has an impact on project costs. However, with this new policy, companies can buy land in remote areas and then construct their own lines. This will help the private sector build big projects in an efficient manner," said a railway board official who also didn't wish to be identified.

In fact, most public-private partnerships in railways had failed because companies had to return ownership of projects to the railways on expiry of lease. "The private sector told us that it was not interested in investing unless it was allowed to own and operate lines. We need the investment to decongest the network and run more trains," the second official added.

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