The Railways plan to introduce strict exit norms for private players in the much-touted public private partnership (PPP) projects. The national transporter has so far not seen much success in awarding PPP projects and the proposed rules could further undermine the interests of private companies that are in fray to win railway contracts. Multinationals including GE, Bombardier, Alstom, Siemens and Hyundai-Rotem and half a dozen other companies are vying for big-ticket rolling stock projects in Bihar and West Bengal that are proposed to be developed in the PPP mode. Railways have drawn up plans to invest Rs 14 lakh crore by 2020 in capacity expansion projects. PPP mode, now being explored on an experimental basis, could form a sizeable chunk of this.
As per proposals being considered by the railway board, railways would mandate the private company to sell at least 25% of its equity to the national transporter in case the partner wants to exit the JV. This 25% will be over and above the 26% stake of the railways in the venture. It is also seeking a first right of refusal over the balance shareholding, giving itself a chance to turn a PPP project into a railway one. The national transporter may also demand transfer of technological know-how by the partner in case of sale of equity.
The move will mean that private developers could not exit the venture by selling its equity to any third party at premium. Railways will have to be involved in all stages of a possible exit and its permission would be mandatory if any third party has to be included in the venture.
Further, in what private players see as a step backwards, Indian Railways is seeking a complete transfer of the JV factory in its favour with ability to ?continue sustained manufacturing from the facility? in case it defaults in successful operation of the plant. Railways has also mooted reduction in lease period of land.
“This is like defaulting and taking over the factory too. It makes no logic sense to us,? a senior official of one of the bidders told FE, fearing disqualification of the company if named. A top official in another bidding company said, ?If technology transfer is insisted, a company could transfer a technology that will be frozen in time?.
The changes, that were suggested by the committees set up to review policy documents on JV/PPP initiatives, are being considered at a time when the national transporter has completed half the bidding process for electric locomotive plant at Madhepura, Bihar. It has been postponing the financial bidding for this project since October 2010, due to which other projects could not be taken up.
?The committees have made presentations before the railway board. The board will take a final call on the proposals after the ongoing budget session taking full care of government’s interest. It may also call a pre-bid meeting to discuss the proposals with bidders,? a railways’ spokesperson said. Once the board decides on the changes, it will have to take a prior Cabinet approval as original documents were prepared with Cabinet nod.