Private ports get flexibility to attract investments for rail links

Ports with private investment such as Dhamra, Dighi, Rewas, Jaigarh, Astranga and Hazira, which had approached the Railways with proposals worth Rs 3,800 crore to build last mile rail links, now have some investment models to choose from.

This follows a Cabinet nod to the Indian Railways for five broad models.

But, there’s a hurdle to be crossed, as the concession agreement of these proposals first needs to be finalised.

For the last few years, non-finalisation of a broad policy framework and concession agreement delayed the Railways’ plan to attract private investments to build last mile rail links.

At present, the Railways has some functional rail link projects with private investments to connect ports such as Pipavav and Mundra. Now, it is looking at different implementation models for each project. Apart from this, the Cabinet nod will broadly help in two-three ways. In case of the three non-BOT (build-operate-transfer) models, the Railway Board can now take decisions, instead of seeking Cabinet approval for each project. The policy also addresses investor concerns on earlier policies. But, it also has conditions that could prevent windfall gains for investors.

Incidentally, this policy is the third version of two earlier ones on bringing in investments to rail infrastructure — rail infrastructure for industry and rail connectivity to coal and iron ore — which were held up due to concerns from investors and other ministries.

The policy contains five models — non-Government Railway, joint venture with equity participation by Railways, capacity augmentation through funding by customers, BOT and BOT (annuity) model. The latter two (BOT and BOT annuity) will follow the existing procedure laid down by the Finance Ministry through the public-private partnership appraisal committee route.


Land ownership of the rail link can vary from a full private rail (line built on land acquired and owned by private party) to joint venture and customer-funded model (where Railways can help in land acquisition on the cost of joint venture, but the ownership will remain with the Railways).

There is a relaxation in case of land ownership for a private Railway line, where investors had raised issues. Earlier, Railways had said that the private land would be transferred to it after 30 years . In the latest policy, Railways has tried to implement some lessons from earlier projects. To recoup returns in case of a private rail link, investors will receive a part of the freight revenues generated on a proportional basis. But, the private rail link owner will have to share 5 per cent of its revenue with the Railways.

In case of joint ventures, the revenues are linked to traffic and concession period. The concession period could vary from 25-35 years based on actual traffic realisation against the projected traffic. PSUs such as Coal India and SAIL may take this route.

For customer-funded projects, there will be a freight rebate of up to seven per cent and a dividend return for the investor, the rate of which will be equal to what Railways pays to Government.

Published in: on November 28, 2012 at 5:12 pm  Leave a Comment