Rlys offers ticket to PSUs, states in PPP space after poor pvt show

Written by Rajat Arora | New Delhi | Updated: Mar 20 2013, 06:05am hrs
With its publicprivate partnership infrastructure projects failing to gather steam, the railways is now banking on alliances with states and public sector units to meet its funding requirements under a remodelled plan.

The railways has set a target of R6,000 crore investment from the private sector (under its existing PPP model) in its annual plan outlay for the next fiscal year.

It is, however, worried that it would miss the target unless an alternate strategy is put in place. With strong partnerships already in place with a few state-owned entities, the national transporter is hopeful that this could be leveraged to strengthen their presence in the PPP plans.

A few states have come forward to invest in constructing rail links and other infrastructure modernisation projects. Some PSUs such as Coal India are also expected to invest in the first and last -mile rail connectivity projects, a senior rail board official told FE.

We are trying to re-model the PPP plans that are also attuned to the interest of such entities. This would go parallel with our initiative to attract the private sector in certain railway projects, the official added.

For railways, getting investment through PPP has been a tough task and the flow of private investment other than the first and last-mile connectivity projects have been dismal. For the next financial year, the national transporter is expecting R3,000 crore from investment in PSUs and the rest of the amount from states which are willing to invest in connectivity projects and sub-urban rail infrastructure.

It is expected that the public sectors participation may also be sought for some of the existing PPP projects of railways that have failed to take off due to lack of interest from private sector players.

States such as Karnataka and Haryana have already offered the railways free land to set up rail lines and factories. The national transporter is willing to even offer equity to government-owned entities for projects in these states.

In the 12th Plan, the railways has an ambitious target of R1 lakh crore under its PPP initiative but there are apprehensions that the private sector would not invest in projects such as the high-speed rail corridor for which the national transporter has set a target of R20,000 crore.

This can also be a potential project to attract investment under the proposed PPP initiative.

Only port connectivity projects have attracted private investment, and other projects such as the high-speed corridor are languishing steam at loco sheds as they are not viable for private sectors. Investors have shown interest in the R20,000-crore Mumbai elevated corridor, but the state support agreement has still not been signed and uncertainty looms over the future of the project, the official said.

In the 11th Five-Year Plan, the national transporter had set a target of attracting investment worth R50,000 crore from the private sector under the PPP model but could garner only R8,000 crore.

Sources said that ill-conceived and politically motivated PPP strategy derailed the plans, resulting in waning interest from Indian and global private sector companies.

For railways, PPP plans are important as its own finances do not leave enough surplus to invest in infrastructure and modernisation projects.

It is working on a operating ratio of 88.8%, meaning it has to spend R88.8 for earning R100.

For 2013-14, the railways sought R38,000 crore as gross budgetary support from the Centre but has received assurance for only Rs.26,000 crore.