Rlys to offer sops to woo pvt players

With projects worth Rs 1.45 lakh crore pending, the cash-strapped railways plans to offer incentives, including tax holidays, to attract private players to invest in pending socially desirable and strategically located projects. A parliamentary panel was recently informed that the railways will approach the finance ministry after formulating the proposal.

The move is an attempt to make investments in socially desirable but economically unviable projects attractive under public private partnership (PPP) mode by offering tax incentives and concessions after the lukewarm response of private players.

The state-run transporter is considering incentives like tax holidays under the I-T Act, exemptions from central excise and custom duty on purchase of capital goods, relief from sales tax and VAT and relief from payment of octroi and entry tax.

Parliament’s Railway Convention committee has asked the railways to examine the prospect of PPP in socially desirable projects in backward areas in consultation with finance ministry.

“Most of the socially desirable projects have low financial returns in the short run, but yield high socioeconomic dividends. The government has to support such projects,” a railway official said.

Faced with funds crunch and a large number of pending projects, railways has given priority to those projects in which state governments —such as Karnataka, AP, MP, Chhattisgarh and Maharashtra — are sharing costs.


Fund crunch hits railway projects

The railway projects, proposed to be taken up in the state on public private partnership (PPP) mode, may not take off as the Rail Vikas Nigam Ltd (RVNL) has ruled out undertaking these projects unless the state government is willing to fund them.

Chief project manager of RVNL Alok Tiwari said, “Private investors are not coming forward to invest (in these projects) due to lack of a proper business model.”

“Not even a single investor came forward when we called for expression of interest for Tumkur-Rayadurga new line. The railways is not in a position to fund the proposed projects. Therefore, it is up to the state government to decide on undertaking these projects,” he observed.

The Railway Board had proposed to undertake Talguppa-Honnavar; Bijapur-Shahabad; Tumkur-Rayadurga; Dharwad-Belgaum and Torangal-Ranjitpur projects on PPP mode in 2010-11 after the state government requested the Railway Ministry to sanction some projects on priority to improve the rail connectivity in the state.

As these railway projects are expected to contribute to the development of the areas, the state government offered to provide the land required for the projects free of cost, besides partial funding.

The Railway Board entrusted these projects to RVNL, a special purpose vehicle established by the railways for undertaking projects on PPP mode. The railways also entrusted Hospet-Vasco doubling project to RVNL. The RVNL had also got the feasibility done through some private consultants for undertaking these projects.

As investments are not forthcoming, the railways undertook Tumkur-Rayadurga project with 50 per cent funding from the state government and decided to wait till they find a private investor to undertake the remaining projects.

RVNL had to undertake Hospet-Vasco line, one of the busiest routes in the state, with loans from ADB.


Railways speeding up fare revision

Unable to make both ends meet and generate resources for development, the Railways are hurriedly preparing at least two Cabinet notes for ushering in investment through Public-Private-Partnership (PPP) mode and increasing freight and passenger fares in tune with the rise in input cost.

The objective is to ensure sustained income to meet sustained expenditure for sustained development, all of which have been eluding the Railways for more than three years. A sense of urgency was reflected in the freight increase ahead of the 2012 budget presentation but the move to increase passenger fares met with only limited success for political reasons.

Now the Railways have decided to make amends and increase fares for second and sleeper classes which would bridge the gap by Rs. 4,000 crore annually. Authorities are mulling over the propriety involved in this action as Parliament has approved withdrawal of a proposed hike in the fare for these classes.

The Cabinet note for setting up the Rail Tariff Authority is almost in the final stages, according to highly placed Railway Board sources.

The authority would suggest the guidelines on which cargo and passenger fares would be revised basically in proportion to the hike or reduction in diesel prices. The board will take the final call on such issues.

The Cabinet note on PPP mode is more complicated as the Railways are keen on retaining the operational function because it involves their land and assets. Moreover, efforts during the past three years to woo private investors have not yielded results.

Plan panel objection

The Planning Commission, however, is not amused by the proposed Cabinet note. Its senior officials are viewing it with suspicion as a delaying tactic on the part of railway officials wanting to maintain their stranglehold on the affairs of the Railways.

Besides viewing it as a general note, the Commission officials question the need for such an exercise when the Centre has already issued guidelines for the formulation, appraisal and approval of PPP projects.

They stressed that the Railways had only prepared projects based on the guidelines issued in 2005 and sought the approval of the Cabinet Committee on Economic Affairs or the Cabinet, if required.

Don’t count us out: union

But the Railways have also to contend with trade unions, whose leader Vivek Khare said they were not against induction of technology or development of the Railways through PPP mode but there had to be fair play.

The unions have suggested that bids be invited and joint ventures formed, and that the Railways use the land at their disposal as equity in the proposed business. The unions warned against bidding them out, underscoring that a union had opposed leasing of prime land at Bandra in Mumbai for which bids had been called.

The Cabinet note would ensure sustained income to meet sustained expenditure

The Planning Commission views the note as a delaying tactics by the railways.


Joshi pushes for private investment to boost railway revenue

Railways minister C P Joshi seems to be pushing UPA’s reforms agenda, including encouraging private investment to revive the cash-strapped national transporter, in a big way.

The much-touted high-speed trains are back on the agenda amid indications that a pact with Spain will be signed on Friday to explore the possibilities of introducing bullet trains along with improvement of rail safety measures.

Sources said that Railway Board made a presentation before Joshi on the scope of starting public-private-partnership (PPP) in rail projects, particularly in laying of railway tracks.

In its presentation, the Board has outlined that the priority areas can be laying tracks for port connectivity and new tracks for better coal linkage.

The earlier proposal on promoting PPP in rail projects — conceived during Mukul Roy’s tenure — was sent to Joshi after the ministry came back to the Congress’s kitty.

An official said that Joshi wanted to get a clear picture of how the Board planned to push PPP model in this sector.

Sources said this can be the beginning of railways preparing a note to seek Cabinet nod on policy issues to initiate a few pilot projects under PPP mode.


Railways try to woo investors

Much like the new car models that are launched to lure buyers and increase sales, the railways too has been experimenting with new models of Public-Private-Partnership (PPP) for financing its projects for past many years, but has been dogged by poor and unimaginative marketing strategies, with the result that not much success has come its way. Now once again the Ministry of Railways has approached the Union Cabinet for approval to new variants of its PPP models to attract private investors in funding its connectivity projects. In 2010, the railways had initiated a new R3i (Railway In­frastructure Investment Initiative) policy aimed at attracting private sector participation in similar projects with a view to retaining and increasing rail share in freight traffic. This was not made applicable to lines intending to pro­vide connectivity to coal mines and iron ore mines, directly or indirectly. It did not take the railways long to discover that this policy had failed to attract sufficient investment from the private sector. Hence, the PPP structure was redesigned, and under the new proposal, the owner or concessionaire has been allowed to develop rail connectivity to ports and mines as private railway lines by acquiring land and mak­ing investments in it.

This is not the first time that the Indian Rail­ways has fallen back on a PPP, for garnering ad­ditional funds. Indeed, whenever its finances have been in the doldrums, the railways have found it convenient to use PPP as a good peg to hang its coat on. We have noticed budget documents an­nouncing new initiatives on PPP, white papers making a prominent mention of it, and fresh policy circulars getting issued to reassure all and sundry of the seriousness with which railways is pursuing this item on its agenda. The Indian Rail­ways’ Vision Paper 2020, presented to Parliament in December 2009, had highlighted PPP as a critical mission area and also gave out a long list of activities identified for execution through this medium: multi-modal logistics parks, develop­ment of world class stations, dedicated freight corridors, et al. Unfortunately, good intentions are not getting translated into action.

A few years ago, the railways had proposed a PPP model for augmenting wagon and locomo­tive manufacturing capacity. A number of re­puted international transportation companies had evinced interest in participating in these projects. However, since the railways were asked to commit to assured offtakes of locomotives and wagons from private manufacturers for at least 10 years, besides contributing towards initial working capital of these projects, this model was promptly dumped, as railways feared that it may be forced to close down its existing manufactur­ing units if private parties were allowed to set up new factories.

It is high time railways did some introspection and realised that the complex procedures and legal framework within which the Public-Pri­vate-Partnership projects are required to oper­ate in railways have not been able to incentivise the private sector in participating in such proj­ects. The procedures show a distinct bias to­wards the railways, leading to the perception that the PPP partners are not treated as equals. In the container train operations, for instance, which the railways claim to be its major PPP initiative, private players are not happy since they feel that there is no level playing field for them and the railways have been denying them their fair share in the venture. They complain of unreasonably high fees for use of terminals built on railway land, and of the differential haulage rates, which has cut into their profit margins. Moreover, frequent changes in the haulage charges and other terms and conditions make it difficult for private players to enter into long-term commitments given to their clients. This feeling of uncertainty is not conducive to a healthy business climate.

It is essential to create a proper PPP en­abling environment with streamlined proce­dures and a right mix of fiscal incentives and risk mitigation measures to attract private sector to participate in infrastructure projects. Setting up of an independent regulatory body that can enforce contracts, settle disputes and resolve the conflict of interest between rail­ways and private players can help in winning the latter’s confidence.

A probable factor causing the progress in PPP in railways remaining tardy is that whereas in ports, highways and airports the projects can, by and large, be operated and maintained indepen­dently of the existing system, it is not possible to do the same in railways, where any project has to be an extension to an existing larger railway network. As railway activities are not readily ac­cessible to the private sector, it becomes a major constraint in developing a sound PPP venture. The remedy lies in railways viewing private in­vestors as potential partners rather than as com­petitors. The former railway minister had also wanted the existing marketing schemes to be ‘reviewed thoroughly to give them greater mar­ket focus, and provide greater control to the rail-user by making him a stakeholder’.

The Planning Commission estimates that pri­vate investment mobilisation in the railways in the Eleventh Plan is likely to be only 4 per cent of the Plan outlay. This is far less than the private capital share in other sectors, such as ports 80 per cent, airports 64 per cent and roads 16 per cent. Large funds are required for investment in new projects in the Twelfth Plan period. These cannot be mobilised through budgetary support and market borrowings alone, and PPP projects can provide a shot in the arm. However, unless there is a major policy shift and railways shed its baggage of past ideology, it is unlikely that this shortfall can be met from PPP projects.

A parliamentary panel recently observed that the railways, because of the long gestation pe­riod and relatively low returns, should not bank too heavily on the PPP route but instead ex­plore other avenues for resource generation. These are valid observations, because PPP can­not be taken as the ultimate funding solution. Indeed, reliance on private participation does in no way diminish the role of the government in providing the resources and leadership nec­essary to build, operate and maintain sustain­able public infrastructure.


PMO clears roadmap for Mum-Ahd bullet train

Putting the ambitious Mumbai-Ahmedabad rail corridor on the fast track, the railways will constitute a project steering group to examine options for executing it.

The prime minister’s office (PMO) on Friday announced a roadmap for implementation of flagship infrastructure projects, which include high-speed corridors, the elevated rail corridor for thesuburban Mumbaisection and redevelopment of stations.

The high-speed rail corridor project between Mumbai andAhmedabad andother six routes is technologically the most advanced railway project. A pre-feasibility study has been conducted by RITES in association with other experts.There are various alternatives for implementing the high-speed corridor project but out of all, only the special purpose vehicle (SPV) or the public–private partnership (PPP) options, seem viable, said a senior railway ministry official.

The group will examine options for implementing the project and finalizing the feasibleones,suggesting waysof strengthening the capacity of railways to design and executehigh-speedtrain projects and suggest mechanisms for quickly moving forward on chosen options.
The elevated rail corridor in Mumbai, the other key infrastructure project of the railways, also got the PMO’s nod. According to the official, the projectwillbeimplemented in PPP mode and a concessionaire will be finalized by March 15, 2013. — PTI
Estimated Cost 60,000 crore Expected Speed 300kmph Distance 492 km Travel Time 2.5 hrs Duronto takes 7 hours to cover the distance.

Zonal Railways to upgrade retiring rooms through PPP mode

Ministry of Railways has issued instructions to the Zonal Railways to upgrade the retiring rooms including dormitories under Renovation/Rehabilitation, Operation and Transfer (ROT) Scheme through Public Private Partnership (PPP). This information was provided by KH Muniyappa, Minister of State for Railways in Lok Sabha recently.

According to a PIB release, under the scheme, the contract allottees are to renovate the existing retiring rooms and dormitories, or construct new ones as the case may be, operate it for a fixed period as per agreement and transfer it to the Railways after completion of the agreement.


Surf Net, watch songs aboard trains in India

Vadodara Karnavati Express to have LCDs, Wi-Fi connectivity, others may follow soon

There is some good news for those travelling by train. The Western Railway is planning to put up LCDs on the Karnavati Express under a Public Private Partnership (PPP) model. The pilot project will be initiated in five AC chair coaches of the train where advertisers will place nearly 28 LCD screens at pre-decided locations. The coaches will also have Wi-Fi enabled Internet connectivity onboard.

Once successful, the model will be replicated in other trains as well.

Western Railway had earlier announced that it will install LCDs in local trains in Mumbai. This was to make people aware about what is happening around the world.

The system will consist of individual LCD screens with individual headphones using either Bluetooth or Wi-Fi technology. The system will be introduced by providing individual LCD screens or hand-held devices. This is part of the IT upgradation plan of Indian Railways. The hand-held computer system, which is being run in a few Shatabdi Express trains on a pilot basis, is expected to be replicated in other trains.

Senior Divisional Commercial Manager, Vadodara, D K Chachondia, said: “The project for putting up LCDs is very much in the process. But I cannot give more details, as the Mumbai region is handling the project. They will maintain it.”

Earlier, the railways had started a pilot project to computerise on-board passenger interface operations with the help of General Packet Radio Service (GPRS). At present, the Travelling Ticket Examiners (TTEs) are doing it manually. This was done in the Ahmedabad-Mumbai Shatabdi Express with GPRS provided by Bharat Sanchar Nigam Limited.