Why railway station redevelopment projects do not attract private players

After 15 years of unsuccessfully trying to attract the private sector, the public sector seems to have taken the lead in developing the mega-programme

It was way back in 2004-05 that the Indian Railways first thought about the redevelopment of a railway station. Old timers in the Railway Board still believe the masterplan for the New Delhi station submitted in 2006 by Terry Farrell and Partners, a Hong Kong-based architectural firm, including a project of 16 commercial towers extending up to Connaught Place from the Paharganj side of the station, would have transformed Lutyens’ Delhi. 

On February 8, 2008, at least 35 companies — including Reliance Energy, GMR, DLF and Videocon Industries — had expressed interest in modernising the station too. The project, which was seen as a showpiece ahead of the Commonwealth Games in 2010, was dropped after objections from the Delhi Development Authority (DDA) over the proximity of the project to Connaught Place.

The government is now planning to commission upgraded versions of the Habibganj and Gandhinagar stations by March 2020. If this deadline is met, it would mark the realisation of an ambition that has been as a non-starter for the past 15 years. “A major reason the New Delhi project did not take of was the lack of co-ordination between various government agencies, including the DDA. Concerns among industry players over the real estate revenue potential may be another prime reason for its slow pace,” said R Sivadasan, former finance commissioner with the Railways. 

These uncertainties remained when the Railways launched the first phase of station redevelopment programme covering the commercial development of 23 stations for Rs 9,000 crore in February 2017. This plan to revamp the appearance of stations by providing digital signage, escalators, self-ticketing counters, executive lounges, restaurants, malls and movie halls attracted scant industry interest. No matter, the project was later extended to a Rs 1 trillion project covering 400 stations. But the interest remained tepid. “Following demands from real estate players, the government extended the lease period from 45 years to 99 years but the risks of investing in a new venture and doubts over rates of return persisted,” said Vijay Dutt, former additional member of the Railways. 

Many point to the case of the commercial complex at the state transport bus station in Thiruvananthapuram to highlight the lack of potential in Indian transport hubs. The Kerala Transport Development Finance Corporation (KTDFC) had to invite as many as 11 tenders, after it remained a “ghost building” for several years. Initially, ideas were floated for the Railways too to join the project, but it did not go ahead citing viability issues. “A major concern for developers was the accessibility to stations as most of the approach roads were congested, a problem that we faced in stations like Jaipur. So the government will have to ensure there are access roads or elevated roads to approach these selected station,” Sivadasan pointed out. 

In October 2019, the slow pace of station redevelopment again came to limelight when it invited criticism from NITI Aayog Chief Executive Officer Amitabh Kant. In a letter to the Railway Board, Kant said despite the commitment to take up 400 stations for last several years, “actual implementation has not happened except for a few isolated cases in which a few stations have been taken up through EPC mode.” The isolated cases that Kant mentioned were those of Habibganj and Gandhinagar. For Habibganj, the Rs 400-crore project was allotted to the Bansal group in June 2016 and is expected to be on track by February 2019. Close to 80 per cent civil work is completed so far. On the other hand, the Rs 4,000 crore Gandhinagar hub project, taken up by Kunal Structure in January 2017, is to be commissioned by March. Kant asked the Railways to take up at least 50 stations on a priority basis. 

Kant also suggested a solution for the lack of co-ordination between the railway ministry and the urban development ministry over land lease clauses at Bijwasan and Anand Vihar in Delhi, that led to cancellation of tenders of those stations. He asked to set up an Empowered Group of Secretaries comprising the NITI Aayog CEO, Railway Board chairman, Secretaries of Department of Economic Affairs and Urban and Housing Affairs. 

“What lies deep among all these issues is slow pace of real estate growth in the country for the past few years. The government can compensate with more attractive proposals for land usage, as it did by allotting 30 per cent for housing,” said Prateek Kumar, an analyst with Antique Stock Broking. 

As things stand, the state will now bear the burden of modernising India’s stations. Some experts indicate that the government may have to consider charging the passengers for a dedicated station redevelopment fund, so that the Railways can take up the project on its own.  Indian Railway Stations Development Corporation (IRSDC), the nodal agency for station redevelopment, is in talks with Indian Railway Finance Corporation (IRFC) and the World Bank for funding of station projects. These includes Anand Vihar, Bijwasan and Chandigarh. Apart from that, private equity players and pension funds have also been invited for partnerships to fund redevelopment for at least 10 high-potential stations. 

To speed up the process of redeveloping another 39 stations, five public sector undertakings — NPCC, Engineering Projects, MECON, RITES, Bridges & Roof Co — have also been roped in. The companies are cushioned by the commitment that if the contract is not awarded in three years, they will be paid an 8 per cent return on expenditure.

For the time being, the iconic station redevelopment plan is still a work in progress after 15 years.