It's a snail's pace for PPP projects in Indian Railways

Most of PPP projects announced currently face bureaucratic hurdles such as delays in getting cabinet approvals etc

When a steering committee headed by Principal Secretary to the Prime Minister meets on 19 July to award public private partnership projects in infrastructure sector, it will be faced by a huge backlog of 350 projects in railways that require funding of Rs 2 lakh crore.

The Prime Minister's Office has formed an inter-ministerial group comprising of Chairman Railway Board, Finance Secretary and Secretary Planning Commission, among other members, to come up with ‘creative financing-cum-implementation mechanisms’ to clear the backlog. Arunendra Kumar, Chairman Railway Board, had earlier told Business Standard that the Railways have decided to prioritize the projects "needed to be completed within the available resources”.

Elevated Rail Corridor in Mumbai, redevelopment of stations, power generation and energy savings project, coal mine and port connectivity were identified as the areas of priority for the 12th plan period. There were also ambitious proposals such as high speed bullet train corridor between Mumbai and Ahemdabad which were set for feasibility study back in 2009 and are still to see any development.

Projects such as station modernisation-the so called Green field and Brown filed stations are yet to attract any investment which were mentioned in the budget of 2013.

The Elevated Rail Corridor is still shuttling in files between various ministries. More than four extensions have already been taken for the RFQ process. The much talked about project is ‘still under discussion’ even after intervention from the PMO.

The Indian Railways has limited resources to meet its backlog. Each year Indian Railways receives a funding of Rs. 26,000 crore from the Central Government, internal resources of about Rs 14,000 crore and this year it expected to raise Rs 6,000 crore through PPP.

To clear the backlog of 350 projects, by the estimates of the experts it would take over two lakh crore rupees which seems a farfetched dream. The PPP target for the 11th year plan was Rs. 66,000 crore compared to the 12th year plan target of Rs. 1 lakh crore. In the eleventh plan, the Railways could, however, achieve just 4% of their set target.

Although Coal and Port Connectivity Projects have breathed some fresh air they are still far away from any momentum. Port connectivity projects worth Rs.3800 crore have attracted private investors. Six out of five projects namely- Astranga, Dighi, Jaigarh, Dhamra, Rewas have got the nod from the Ministry of Railways for the go ahead.  Hazira port has recently approached Railways and is yet to receive the nod.

The approved five projects are undergoing private studies for feasibility. “It is not yet clear when the concessionaires would be exchanged and by the current pace of development, most conservative figures indicate that it will take more than two years for the studies to be completed and a further plan to be chalked out” added a source from Rail Bhavan.

Coal connectivity projects set out in budget speech worth Rs 4,000 crore have taken a step ahead with signing of a Memorandum of Understanding between Chhattisgarh Government, IRCON and SECL. Under the MoU, the three partners would invest in the ratio of 10:26:64, with SECL spending the largest chunk.

Two lines are proposed to be built under this project between Bhupdeopur-Raigarh and Gevra Road-Pendra Road stretching over 300 kilometers.  This project is expected to be completed in 3-4 years by government estimates. The structure of the investment is designed under the SPV participative model under which the Equity to Debt ratio would be 1:2.

 “We have decided to priorities the projects that we need to complete in the resources we have”, said Arunendra Kumar, Chairman Railway Board to Business Standard. However, it seems that with prevailing bureaucratic attitudes, political leadership and intervention these projects would continue to move at snail’s pace frustrating brighter prospects of development.

The projects where some movement is expected by December are Rs 32,000 crore worth two locomotive factory projects at Madhepura and Marhowra, both in Bihar. The two projects were announced by Lalu Prasad in 2006 during his tenure as railway minister. They were to be set up in partnership with private players, with the railways holding 26% stake in each but the projects could never take off despite bidding process being conducted several times.

Railways' PPP Projects

Type of Project/Expected date of completion	Project Description	Current Status	Model of Project/Expected Date of Completion
Port Connectivity Projects-        Worth Rs 3800 crore	Six ports are proposed to be built namely at                 Astaranga-NavyugaEngineering; Dhamra: JV of L&T, Tata Steel; Rewas-RVNL & Reliance Dighi –Balaji Infra & RVNL Jaigad-JV of Konkan Rail & Jindal Group. Hazira has recently approached for approval.	A nod from the Ministry of Railways has been given to all except Hazira, whose request is under consideration. Companies undertaking market studies. Concessionaire not exchanged yet.	Astranga, Dhamra are private lines under model 1 with 100% private investment. Dighi and Rewas are JV with RVNL; Jaigarh is a JV with Konkan Railways
Mumbai Suburban Line-Urban Rail Connectivity-Worth Rs 24,000 crore	Links Oval Maidan from Virar. Elevated corridor will have the length of 62.28 km	RFQ has already got 4-5 extensions, till now six bidders have taken the forms namely-ILFS, GMR, L&T, CAF, R-Infra, Gamon India. 95% of land is already with Railways. State Support Agreement and financial Analysis is ‘still under  drafting’.	Uses the PPP model of Design, Build, Finance, Operate and Transfer (DBFOT) basis.