Companies see bigger PPP role in railway projects

The government’s proposal to increase freight by 5% in the rail budget is set to impact major industries like steel, cement, coal and may also lead to marginal increase in power prices. But at the same time it has sought to offer many new projects to the private sector under the public private participation (PPP) route, enthusing India Inc.

Industry analysts that TOI spoke to believe the hike in coal freight charges will be neutral to the coal sector but will hit downstream sectors using coal such as power, cement and steel. Essar Steel managing director Dilip Oommen described the imposition of dynamic fuel-linked revisions in freight as a paradigm shift.

“Increase in freight will not only push up steel prices, it will also add to inflationary pressures,” he said.

Overall, however, industry is enthused with the move by railways to open up its doors for private sector participation, seeking a bigger role in a host of projects to be taken up through the PPP mode.

The budget has proposed that Rs 1 lakh crore of Rs 5.2 lakh crore of investments would be mobilized through the PPP route in the 12th Five Year Plan ending 2017. “PPP to the tune of Rs 1 lakh crore will open the doors for privatization in the railways. Latest technologies like for bullet trains, among others, can be brought into India,” Videocon Industries chairman Venugopal Dhoot told TOI.

Harsh Goenka, chairman RPG Enterprises, seemed equally enthused. “On-time execution of projects will need to be closely monitored,” he said.

India Inc sees a host of projects up for grabs by the private sector like the dedicated freight corridor (DFC), redevelopment of railway stations, power generation, energy-saving projects, freight terminal operations, setting up of wagon and locomotive units, gauge conversion and network expansion, among others.

Rajeev Jyoti, chief executive for railways business at L&T, feels that the budget reflects a paradigm shift in the thought process of the railways. “Moving to private sector will ensure higher productivity and railways can focus on its core strength of operations and maintenance,” he said.

However, the private sector seeks a clear road map on PPP for taking forward some of the more capital-intensive projects and is awaiting announcements on the policy front, highlighting the incentives for private sector. Manish Agarwal, executive director for capital projects & infrastructure at PwC India, believes that 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.

Hemant Kanoria, chairman, Srei Infrastructure Finance, said, “I am sure this budget would be followed by announcements on the policy front highlighting the incentives for private sector.”