Rlys to fund Infra Plans under BOT Annuity Model

Rlys to fund Infra Plans under BOT Annuity Model: Invite open Bidding to Rail PSUs

 New Delhi: The ministry of railways is close to finalizing a scheme to utilize the cash surplus of the public sector units (PSUs) working under it for railway infrastructure projects, a ministry official said, requesting anonymity.

Under this scheme, the railways will open the bidding for the projects only to the railway PSUs under the build-operate-transfer annuity model for public–private partnership (PPP).

The scheme is expected to be ready in a month’s time, the official said.

“Railways is short of funds for investment in its infrastructure. The idea is to bring the surplus with railway PSUs in the circuit through this scheme and channelize it for infrastructure creation,” the official said.

Railway minister D.V. Sadananda Gowda had announced in his railway budget speech on 8 July that railways was working on alternative ways of resource mobilization and was keen to tap the cash surplus of railway PSUs for infrastructure projects. “Railway PSUs have done very well and are financially sound. I propose to launch a scheme to bring in investible surplus funds of railway PSUs in infrastructure projects of railways, which can generate attractive returns for PSUs,” he said.

There are 16 PSUs and other organizations functioning under the railway ministry. These include Container Corp. of India Ltd (CONCOR), Rail India Technical and Economic Services (RITES), IRCON International Ltd, RailTel Corporation of India Ltd (RailTel) and Indian Railway Finance Corp. Ltd (IRFC), among the others.

In the year ended 31 March 2013, CONCOR reported a surplus of Rs.6,151 crore, IRCON Rs.2,280 crore and RITES Rs.1,095 crore.

“Any company can do projects three times the surplus it has,” the official cited earlier said.

The railways had announced a policy framework for private participation in rail connectivity and capacity augmentation projects in November 2012.

The policy provided for five models for PPP investment: non-governmental railway, joint venture with equity participation by railways, capacity augmentation through funding by customers, build-operate-transfer (BOT) and BOT annuity.

The ministry is in the process of preparing the model concession agreements for these models.

“This scheme would also allow us to experiment with the annuity model for PPP with our own PSUs who are not that profit conscious. We have held extensive consultations with the PSUs,” the official said.

“This model will have a very beneficial impact. The railways PSUs will construct these projects at a reasonable cost per kilometre, which will set the benchmark subsequently for the private sector as railways slowly opens up for private sector investment. This is a good step,” said R. Sivadasan, former financial commissioner, ministry of railways.

Vinayak Chatterjee, Chairman of Feedback Infrastructure Services, an infrastructure services company, said, “This moderated and gradual approaching to opening the railway sector is good. Annuity is an excellent model for the railway PSUs to start with. It removes traffic risk and brings in external sources of capital and expertise.”