Rlys to rope in private players to improve freight connectivity

Even as the economic slowdown has discouraged investors to take up new projects, the Indian Railways seems to have zeroed in on models to invite private participation in development of rail sidings (tracks connecting industries, plants to main line), as mainline tracks to tap the freight potential in upcoming investment in the areas that do not have rail connectivity.

The models allow the private players for the first time to develop the tracks on their own, and avail an opportunity of freight rebate on traffic commitment, thereby enabling them to redeem their initial investment over a period of time.

?With the new establishments moving away from the main line, the distance of the sidings have increased and we need connectivity to these plants. For the first time, the railways is offering the private players to go ahead and build the line. This will also ensure that the projects are completed within specified time and cost,? said a top official from the ministry of railways.

The initiative envisages two funding models, advance funding model and Special purpose vehicle (SPV) model. In the advance funding model, the lines which are more than 20 kms will qualify.

The railways will acquire land, the cost of which will have to be paid by the participant. As suggested by the nomenclature, the applicant will make the monetary contribution in form of an advance. As a concession to the applicant, the railways has allowed the applicant to recover the advance contribution made by them via a freight rebate of 10%-12% on the incremental outward traffic, which will be valid till the advance contribution is made by it is recovered or for a period of ten years, whichever is earlier.

Explaining the rationale behind the scheme, the official said, ?The applicant has an opportunity to use the rebate offered on the freight to redeem his investment in the project. Also, since the operations and management is the railways? responsibility, the participants need not worry about it. So at the end of the day, an asset is created for the railways and the participant who creates it also has n opportunity to take out his investment in terms of rebate over a period of time.?

However, the scheme does not apply to coal and iron ore traffic. ?The scheme is meant to incentivise private players to come forward to us. So, we are targeting the steel, cement, port traffic, fertilizers and foodgrains. However, coal and iron ore are already being carried by the railways in huge quantity,? the official added.

The scheme has garnered interest from the private sector players. Shree Cement and Gujarat Ambuja have joined hands to develop a 25-km line worth Rs 100 crore. At Ennore port in Tamil Nadu, 80 km line is coming up at an investment of Rs 450 crore.

In the other scheme, an SPV will be formed between the railways and the applicant and the railways? share in equity will be 26%.

The SPV will be granted a concession, a share in the revenues generated on the line in lieu of the construction, operation and maintenance of the line.