Private firms to fund 60% of 6 freight lines under Railways’ first HAM projects

The projects, located along freight corridors, will be developed under the Hybrid Annuity Model (HAM), under which the government and private developer share the project cost and associated risks, similar to the model used in the highways sector.

The six projects have a combined bid project cost of Rs 15,976 crore, while the total capital cost over their 17-19-year concession period is estimated at Rs 40,866 crore. The routes will primarily cater to the movement of coal, besides iron ore, bauxite, coke, chemical manure, cement and food grains.

The proposals will now be sent to the Union Cabinet for final approval. Bids will be invited after the Cabinet’s approval. The projects would mark the first time Indian Railways implements a railway project under HAM, a form of public-private partnership.

Four of six projects located in Odisha

Four of the proposed lines are in Odisha. These include the 49.58-km Balaram-Putgadia-Tentuloi Inner Corridor, the 112.56-km Budhapank-Tentuloi-Luburi Outer Corridor, the 101.26-km Jajpur-Keonjhar Road-Aradi-Dhamara Port line and the 48.96-km Tikiri Station-Waltair Bauxite Mines line.

The remaining two are the 207.80-km Manuguru-Ramagundam line in Telangana and the 126.52-km Pakur/Nagarnabi-Godda line in Jharkhand.

The PPPAC had initially granted in-principle approval to these projects under the Design, Build, Finance, Operate and Transfer (DBFOT) model. The Ministry of Railways later changed the proposed structure to HAM after receiving feedback from the market.

Under HAM, Indian Railways will provide 40% of the bid project cost as a grant during the construction period. The private developer will finance the remaining 60%.

“Subsequently, based on market feedback, the Ministry of Railways (MoR) revisited the project structure and proposed their implementation under the HAM. Under the proposed HAM structure, MoR would bear the traffic and tariff risks and provide 40% of the bid project cost as grant during the construction period,” say the minutes of the meeting held on August 1, reported The Indian Express.

Railways to operate trains, retain freight revenue

Once the lines become operational, Indian Railways will repay the private party’s 60% contribution through annuity payments or instalments, along with interest on the annuity. It will also make regular payments to the concessionaire for maintaining stations, tracks and other railway assets.

Railways will operate the trains and collect the freight revenue generated on the routes. It will also assume the traffic and tariff risks. As a result, the private developer will not be penalised if freight loading or revenue falls below the projected levels.

“The RFP (bid document) would specify the applicable conditions including the minimum tenure of the agreement, the roles and responsibilities of the EPC (Engineering, Procurement and Construction) contractor, and the circumstances in which such arrangements would be permitted,” the Indian Railways said, reported The Indian Express.

Construction of all six projects is proposed to start from April 2028. A senior railway official said the bidding process is likely to take place in the 2027-28 financial year.

The six projects are part of a wider pipeline of railway projects planned under the PPP route. According to the official, 49 other projects with a combined estimated cost of around Rs 1.80 lakh crore are in the pipeline.

Indian Railways has already completed 18 projects worth Rs 16,686 crore through the PPP model. Another seven projects worth Rs 16,362 crore are under implementation, including coal and port connectivity projects.

The railway ministry has recently added HAM, along with the Development Partner Model (DPM), to its participative policy. The move is aimed at addressing financial constraints and attracting long-term private sector capital for railway infrastructure development.