Indian Railways has allowed subsidiaries and joint ventures of private companies to set up platforms for handling third-party freight, a key change in the one-year-old private freight terminal (PFT) policy intended to generate sufficient investment interest from the industry. The national transporter has also diluted the eligibility criteria regarding net worth of the applicant.
In the revised policy, which is effective from June 21, 2011, the railways would consider the net worth of the holding company or the lead partner of the joint venture while scrutinising the application. In the original policy brought on May 31 last year, only those companies that have a net worth of R10 crore or a revenue of R20 crore on the last day of the previous financial year could apply.
?The net worth provision in the original policy was a hindrance as proposals were not coming through. Companies that were interested in the policy were proposing to set up new subsidiaries to forge joint ventures to undertake the work of building freight terminals, and we did not know whose net worth should we consider,? a senior official in the railway ministry told FE on condition of.
The railways have also softened their stance on land acquisition for the terminal by private companies by removing the clause of showing original papers of land ownership or lease. The move has come after a few private firms could not produce the required documents and had to withdraw the proposals. ?Our main role in the policy is to facilitate private companies to set up the platform and run trains on their behalf. Checking land acquisition is not our competency,? another official in the ministry said.
The entity expects to receive profitable investment proposals in the sector after the issue of the revised policy. ?We believe that the policy would be a hit in next one year,? the second official said.
Seeking to prevent revenue loss, the railways have included a clause to compulsorily change a private siding into private freight terminal in case the siding is being used to carry third-party cargo. The railways have a policy allowing private companies to set up cargo terminals, called private sidings, on their network for captive use. As these are used for transporting the companies? own cargo, users don?t have to pay anything to the railways for utilising the rail network. However, in exceptional cases the railways allow the firms to use such terminals for transporting goods for a third party, for which the firm earns revenue but continues to pay nothing to the railways.
?As there was no revenue-sharing provision in private sidings, firms started seeking special permission to carry third-party cargo saying they needed to earn revenue to stay in operation. If we allow that to happen, the private siding becomes equivalent to PFT, minus the revenue-sharing clause. So to avoid any revenue loss, we have asked such operators to convert their private sidings into brownfield PFT,? the first official said. In case of brownfield PFT, the operating company has to pay 50% of the prevailing terminal charge levied at the railway goods shed or R10 a ton, whichever is lower, to the railways after two years of the PFT commissioning.
In order to safeguard their revenue, the railways have also excluded some varieties of coal, coke and iron ore from the list of commodities that can be transported by the PFT operator. Coal and iron ore for export contributed 52% to the railways? total freight earnings in 2010-11.