Indian Railways may look at a rate of return (RoR) of 12% on its investments under the revamped station redevelopment programme as the transporter plans to be a co-investor along with private developers. This was mooted by railway minister Piyush Goyal during his interaction with developers earlier this month. The minister sought stakeholder comments. Under the arrangement, the transporter will co-invest along with developers at an agreed price point and the developer would have the right to buy the project at an agreed higher level later on, ensuring returns for the railways. This is apart from the 10-12 test stations that the Indian Railway Station Redevelopment Corporation (IRSDC) will redevelop on a fast mode.
According to ministry sources, the minister has also suggested formation of special purpose vehicles (SPVs) and utilising its own funds for station redevelopment on an engineering-procurement-construction model. This is expected to speed up the work and serve to establish a track record to attract more private investment. The transporter, under the new railway minister, has junked the Swiss challenge method of auctioning stations for redevelopment, as it was deemed cumbersome and lengthy. Under the method, a proposal made by an original proponent is opened to third parties to make better offers in terms of time and cost efficiency, and then the original proponent is asked to counter-match the improved offer, if any. Instead, IRSDC is now formulating a single bid parameter for auctioning.
To attract investments, the railways has also decided to sweeten the terms for developers. For instance, revenue from sale of platform tickets of redeveloped stations will go to developers, a committee will be formed to oversee the station development programme and the railways will obtain initial approval on master plan for the first few projects. These are apart from the in-principle approval given to extending leases for commercial development to 99 years, multiple sub-leases and mixed redevelopment of land allowing residences. A group of agencies spearheaded by Tata Realty will also be suggesting termination clauses for the projects, which will be legally vetted by the railway and law ministries. Keeping in mind the safety aspect, state governments will be consulted for additional infrastructure for quick dispersal of commuters which have higher footfalls. IRSDC will also ensure exemption from the environment ministry for brownfield railway projects, including station redevelopment.
These issues were discussed during a meeting attended by various stakeholders including Hiranandani Constructions, K Raheja Group, L&T, DLF, Bharti Realty, Phoenix Group, NBCC and Essel Infra, along with industry body CREDAI. Among various suggestions from developers, NBCC suggested development of railway colonies along with station redevelopment and speedy approvals from the railways. Stakeholders also asked for faster clearances, commensurate or guaranteed returns, decongestion of areas around stations and connectivity, among others.