The railways are planning to form an umbrella special purpose vehicle (SPV) for production of diesel locomotives, electric locomotives, wagons, coaches and wheels. The SPV would, in turn, set up four manufacturing units under the public private partnership (PPP) model with internationally renowned original equipment manufacturers. The manufacturers will be selected through competitive bidding.
According to estimates, public sector undertakings of the railways are expected to fall short in production of locomotives, wagons and coaches during the 11th Five Year Plan. The annual gap is projected at about 150 diesel and electrical locomotives each, 1,137 coaches, 124,226 wheels and 11,418 axles. The gap is expected to continue for a number of years.
By roping in private players, the railways hopes to plug the gap and ensure better availability at all times.
As per the proposal, the railways intend to contribute about Rs 200 crore as equity, subject to a cap of 26 per cent equity in the joint venture. Another option being considered is that the SPV would have an initial capital of Rs 500 crore and paid up capital of Rs 250 crore that will be held entirely by the railways, to be divested to strategic partners if necessary. The SPV may also resort to market borrowing, bilateral and multilateral funding, and export credit to raise resources for the joint venture.
The railways are learnt to have appointed internationally reputed consultants to advice them on the equity stake, role and responsibility of joint venture partners and taxation.
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