Railway Broadband Proposal Nixed

The railways would have to go it alone in their much talked-about broadband venture with the Cabinet shooting down the Planning Commission's proposal that the railways should rope in a private joint venture partner to provide nationwide telecom and multi-media services through an optical fibre cable (OFC) network. The Cabinet, while approving the proposed venture, had taken a view that the proposed corporation should be a 100 per cent subsidiary of the Ministry of Railways, cabinet sources told Business Standard. However, after the Railtel Corporation of India Ltd (RCIL) is set up, it could find joint venture partners if advised by its soon to be appointed consultant for the project. The Cabinet decision has thrown out of gear plans of several private sector companies and financial institutions who wanted a share of the pie by associating with the project right from its inception. The Planning Commission, in response to a cabinet note circulated by the ministry of railways earlier this year, had proposed the Railways should rope in a private strategic partner to compliment and supplement the vast infrastructure available with them with the resources of the partner, possibly a financial institution like ICICI, to build a formidable communication entity. The Railways had proposed Employee Stock Options as part of the bonanza for RCIL employees. In a bid to use the opportunities created by the new telecom venture to get rid of excess flab, the railways had even proposed reservation of STD booths and internet kiosks for employees' wards as incentives for accepting Voluntary Retirement Scheme. But all that is ruled out for the moment, sources said. However, the Cabinet has an "open mind" on the issue and could consider inclusion of a joint venture partner at a later stage if advised by the consultant, the sources said. The name of the corporation is being registered with the registrar of companies and the Railways would soon finalise the consultant who would advise the Railways on asset valuation and prepare a business plan, Rail ministry sources said. The Railways would soon be able to finalise the consultant, appoint office bearers and start work in right earnest within a month, they said. Railways minister Mamata Banerjee has said in parliament that RCIL would help the organisation generate an additional revenue of Rs 500 crore in this fiscal itself. International consultancy giants like McKinsey and Co, KPMG, Arthur Anderson and Pricewaterhouse Coopers are in the fray for being selected as the consultant for the project, the sources said. The Railways have an edge over competition as they have the largest network in terms of the 62,800 km rail lines which gives them the all important right of way (ROW), without which it is extremely difficult to lay an OFC network. "We can provide the best coverage of smaller towns and rural areas, which are going to be the thrust areas for communication in the near future. There may be many large players waiting to enter the lucrative segment, but they would need all kinds of clearances from municipal and other authorities for right of way which we already have," the sources said. The Railways also have a large number of microwave towers already in place and have the second largest functional telecom network and trained personnel in the country after the Department of Telecom which would make them a formidable player in the broadband communication field, they said. RCIL would have a seed capital of Rs 15 crore and an authorised capital of Rs 1,000 crore. The capital structure of the corporation would be decided after valuation of the Railway's existing OFC and microwave assets and its ROW to be conducted by the consultant. The Railways would transfer their ROW to RCIL on a long-term lease of 30 years and the existing telecom assets of the railways would be acquired by the corporation, the sources said.