Railways To Seek Cabinet Nod For Railtel

Armed with an approval from the group of ministers (GoM), the Railways are seeking Cabinet's nod for their broadband venture, Railtel Corporation, within the first week of June.

"We have prepared a Cabinet note and would try to push it through before the prime minister goes for his knee surgery as that would delay the project by another 6-8 weeks. With the GoM according its approval, the Cabinet nod should not be a problem this time," sources close to the corporation said.

Railtel, which is to generate Rs 750 crore for the Railways in the current year, had got stuck due to views expressed by a section of government which held that the Railways should stick to their core business. The Cabinet had set up a GoM to look into the issue and decide if a joint venture partner could be allowed for Railtel.

The GoM gave its approval to the project last Tuesday and recommended that the Railways offload 49 per cent equity in favour of one or more public sector companies. The previous day, the Railway board had agreed to the business plan for the company.

Railtel was set up last year with a seed capital of Rs 15 crore and an authorised capital of Rs 1,000 crore. McKinsey had valued the existing telecom assets and ROW (Right of Way) of the Railways at a little under Rs 1000 crore.

The railways would transfer their ROW to Railtel on a long-term lease of 30 years and the existing telecom assets of the railways would be acquired by the corporation.

The Railway board has agreed to contribute Rs 510 crore as its part of the equity, while the rest of the capital would come from the joint venture partner at a later stage. The debt equity ratio of the company would be 1:1 and it would begin operations by offering the surplus bandwidth already available to other operators.

Railtel would also apply for the Infrastructure Provider (IP-II) license soon and eventually intends to become a national long distance operator (NLDO) when it has a reasonable capacity and its network meets the parameters laid down under the NLDO policy.