Budget 2019: Indian Railways to rely more on PPP for faster completion of projects

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Published: July 6, 2019 3:32:47 AM

Union Budget 2019 India: The railways will also be investing more in suburban networks through special purpose vehicles

Union Budget 2019 India, Budget 2019-20For tracks, Steel Authority of India (SAIL) has a memorandum signed with IR for exclusive supply of rails.

In an indication that the Indian Railways will rely more on private capital to fulfil the requirement of `50 lakh crore expenditure on infrastructure over the period 2018-2030, the Union Budget has proposed to “unleash” public-private-partnership (PPP) for faster completion of projects.

The PPP mode has been recommended for tracks, rolling stock manufacturing and delivery of passenger and freight services. Experts say this means more projects such as the one at Marhowra in Bihar — wherein GE is producing diesel locomotives with the transporter assuring minimum off-take — may be the offing.

For tracks, Steel Authority of India (SAIL) has a memorandum signed with IR for exclusive supply of rails. However, SAIL has not been able to supply the requisite quantity of rails in the past few years and the shortfall last year was 7 million tonne. Two global tenders to procure rail from overseas producers have failed. The lone private domestic manufacturer, Jindal Steel and Power, has supplied a small quantity which is currently under testing. If track manufacturing is opened up for PPP, experts believe a lot of quality improvement can be expected.

Experts also said that it would be interesting to see the schemes IR will come out with for delivery of passenger and freight services through PPP. The railway minister recently denied reports that premium trains such as Rajdhanis and Shatabdis will be privatised.

The railways capital expenditure has been estimated at `1.6 lakh crore for 2019-20, compared with `1.33 lakh crore in 2018-19. The PPP portion of the capital expenditure for 2018-19 was `24,281 crore and is estimated to be `28,100 crore in 2019-20.

To achieve the target of `50 lakh crore capital expenditure on infrastructure by 2030, the average annual investment will have to be around `4.5 lakh crore and will have to come from the private sector. “To make this happen, the establishment of an independent railway regulator is essential. In the current construct where Indian Railways in both the operator and regulator, a step jump in private sector investment will be difficult,” said Rajaji Meshram, partner, EY India.

According to Arunendra Kumar, former chairman of Railway Board, the transporter will have to come up with schemes to make propositions profitable for private participants as returns from railway projects are low. He, too, was of the view that a regulator will be required to assure private players that their interest will be taken care of.
The railways will also be investing more in suburban rail networks through special purpose vehicles like the Rapid Regional Transport System proposed on the Delhi-Meerut route. It has also been proposed in the Budget that a massive programme to modernise railway stations will be launched this year.

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