Railways to raise Rs 1 lakh cr to fund 12th Plan

For an organisation that is aiming at over 19% of its funding requirement coming from private investment, a 9% share of public private partnership in 2013-14 appears small.

Railway minister Pawan Kumar Bansal hopes to raise Rs 6,000 core through the PPP route to fund Rs 63,363-crore Plan next year.

For the Twelfth Plan (2012-1017) period railways have an ambitious target of generating Rs one lakh crore through public private partnership.

This would be 19.25% of the total investment target for the Twelfth Plan. The areas of investment include the Elevated Rail Corridor in Mumbai, parts of the Dedicated Freight Corridor, redevelopment of stations, power generation and energy saving projects and freight terminals.

“This is a challenging area for Indian Railways considering the capital intensive, long gestation nature of rail infrastructure projects and limited success achieved so far,” P K Bansal, railways minister in his rail budget speech said.

According to the twelfth plan document, the Indian Railways has a large shelf life of on-going projects whose completion would require about Rs 22, 5000 crore. Private sector is also expected to invest on traffic facilities, other electrical works, workshops including Public Sector Units, passenger amenities etc.

Experts say, the appeal to State Governments to participate in projects could be a game changer. “The Centre-State SPV route has the ability to get projects up the priority list where the State is willing to participate. The readiness with respect to PPPs is still low, and it is better that the purpose and role of PPPs is better thought through before setting high expectations,” said Manish Agarwal, Executive Director–Capital Projects and Infrastructure PwC India.

With the recently revamped participative policy to enable partnership with ports and mining, the railways is hoping to create a win-win model by payback of investment mainly through freight apportionment. An investment of up to Rs 9,000 crore is expected under these projects including Rs 3,800 crore for port connectivity projects, Rs 4,000 crore for coal mine connectivity and Rs 800 crore for iron ore mines connectivity improvements. Besides, a target of Rs 1,000 crore each is proposed to be fixed for Rail Land Development Authority and Indian Railway Station Development Corporation in 2013-14.

“This budget sets the stage for a wider scope for PPP in rail projects in the years to come. From ticketing to station improvement to food quality control to improvement of warning systems; certainly these are areas where PPP can also be explored,” said Hemant Kanoria, Chairman and Managing Director, Srei Infrastructure Finance Limited.

The Railways, whose performance in PPP projects has been dismal, will need to generate private investment over and above internal funds, borrowings and budgetary support to meet the investment requirements of the twelfth five year plan.


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