Not much success so far, but Indian Railways bets big on PPPs

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Published: July 12, 2019 12:01:42 AM

In the Budget, the PPP mode has been recommended for tracks, rolling stock manufacturing and delivery of passenger and freight services.

The DK Mittal committee in its report in 2014 suggested PPP investments in core operational areas of the railways. (PTI File photo)The DK Mittal committee in its report in 2014 suggested PPP investments in core operational areas of the railways. (PTI File photo)

Indian Railways plans to increasingly rely more on private funds to garner the Rs 50-lakh-crore infrastructure investment requirement by 2030, as announced by finance minister Nirmala Sitharaman in her Budget speech. But the transporter’s tryst with public-private partnership (PPP) has yielded little till now.

Even for the current financial year 2019-20, PPP component under extra budgetary resources (EBR) — which has increasingly become the mainstay of railway capex — is just 33% of the total EBR. At Rs 28,100 crore, PPP during the year will be just 17.5% of the total capex of Rs 1.6 lakh crore.

Suggestions to broad-base PPPs is not new, but IR has not been able to implement the schemes. The DK Mittal committee in its report in 2014 suggested PPP investments in core operational areas of the railways. All wagons could be owned by the private sector, it has said, adding that passenger trains could be either fully owned by private players or taken on a lease basis from IR. There have also been suggestions to have private train operators paying rentals to IR for track access, but none of these has materialised.

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A committee headed by Niti Aayog member Bibek Debroy had also advocated private participation in core railway projects given the infrastructure requirements will be going up at a time when gross budgetary support (GBS) is expected to remain a constraint, though the GBS has gone up from Rs 53,060 crore for 2018-19 to Rs 65,837 crore in 2019-20.

In the Budget, the PPP mode has been recommended for tracks, rolling stock manufacturing and delivery of passenger and freight services. “We have lined up a whole gamut of investments for regional connectivity through government expenditure and private funding also. It has been presented to me and we have gone through them,” railway minister Piyush Goyal told reporters on Friday.

Experts believe the transporter will have to introduce schemes to make propositions profitable for private participants and establish a regulator. “To make this happen (bring in private investment), the establishment of an independent railway regulator is essential. In the current construct, the Indian Railways is both the operator and regulator,” said Rajaji Meshram, partner, EY India.

Of EBR, loans mobilised through the Indian Railway Finance Corporation (IRFC) and taken multilateral bodies like the World Bank are on the rise, burdening railways with higher interest outgo. For instance, estimated lease charges to be paid to IRFC for 2019-2020 is Rs 11,489 crore against Rs 10,056 crore last year.

Such expenses are weighing on the railways’ operating ratio which stood at 97.3% in 2018-19 compared with the original target of 95%.

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