The ministry of railways has allowed private firms to use the Indian Railways network for commodity transport and develop freight terminals. The move is aimed at complementing the utility?s efforts to increase its share in freight movement through the public-private partnership (PPP) route. Currently, the road sector accounts for 65% of freight traffic, while the Railways? share is just 30%.
The new policy, effective June 1, permits private operators to transport goods for end-users for a fee. On developing freight terminals, the revenue model involves fee-sharing between the Railways and the private operator. For operating freight trains, the private firm will be offered a wagon-specific rebate so as to make the business remunerative. The concession period is 20 years, extendable by another 10 years.
A freight train operator can carry fertilisers, cement, chemicals, edible oil and petrochemicals excluding cooking gas, auto fuel and kerosene. For loading each rake ? which should not be smaller than what the Indian Railways use ? a freight rebate of 12% will be granted to the operator for 20 years or until the investment is recovered. In the case of high-capacity wagons, a higher rebate of 2% will be given for each additional tonnage of 10%.
Revenue-sharing on freight terminals will start after five years of the commissioning of the terminal (two years in case of brownfield project). The firm will have to give the higher of 50% of prevailing freight rate or Rs 10 per tonne to Railways.
?The main aim of the policy is to increase the presence of Railways in the overall transport chain and divert traffic from roads to rails. The policies are also expected to benefit Railways in matching the investment target as noted in the Vision Document,? a senior ministry official told FE.
A freight train operator should have a minimum networth of Rs 50 crore or annual turnover of at least Rs 75 crore in the previous financial year. The norms outlined in the policy also make it binding on the operator not to transfer the ownership of the company before one year of starting commercial operations. For terminal operators, Railways will give its nod only if the applicant is providing logistics service for at least last one year or is an existing container train operator. Moreover, the project should be commissioned within three years of getting the approval.
In its Vision 2020, the ministry has forecast increasing the freight volume of Railways from 833 million tonnes (mt) in 2008-09 to 1,010 mt by 2011-12 and 2,165 mt in 2020 through PPP in operation of freight trains and freight terminals. The Railways already permits private firms to run container trains.
Railway minister Mamta Banerjee announced in Budget 2010-11 that the Railways alone could not meet the projected investment of Rs 14 lakh crore by 2020 and that more PPP projects are necessary. Such projects are also being planned for modernising stations, improving public amenities, producing wagons, laying rail lines and setting up automobile hubs. The ministry will revise the policy in a year.