While the railways has sweetened the package for private developers seeking to grab its station redevelopment projects, the plan has run into a hurdle as the MoHUA has asked a Cabinet note in this regard.
While the railways has sweetened the package for private developers seeking to grab its station redevelopment projects, the plan has run into a hurdle as the ministry of housing and urban affairs (MoHUA) has asked a Cabinet note in this regard be redone to protect its agency, the Delhi Development Authority (DDA), from any potential revenue risk. Since the revamp of the Bijawasan and Anand Vihar stations in Delhi required DDA lands next to the stations also to be offered to the developers along with the railways’ own, the MoHUA sought the DDA be assured a share of ‘gross receipts’, instead of ‘net surplus revenue’ as proposed. The railways and DDA are to get lease rentals from the developers; the railways had proposed sharing the receipts with the DDA after deducting expenses on operationalising the project.
With the MoHUA striking the discordant note in an August 8 letter (a copy of which was reviewed by FE) to the rail ministry, the Cabinet last week had to defer a decision on the revamped station redevelopment policy.
While the dispute raised by the DDA will directly impact only the commercial redevelopment of railway stations in the national capital, it could open a Pandora’s box as several other agencies, principally those owned by state governments, own land parcels close to railway stations and a mutually acceptable formula for revenue sharing with them will be crucial for the transporter’s ambitious project to ramp up as many as 600 stations by roping in private investors.
An earlier plan for station development had come a cropper due to lukewarm investor interest, forcing the railway ministry to improve the terms for investors, including an extension of the land lease period to 99 years against 45 years and letting residential premises be a part of the assets created.
As for the two railway stations in Delhi, the developers were to be given DDA land for commercial purpose after being converted to freehold from leasehold at a token payment of Re 1, and the railways and DDA were to share the lease proceeds in a 3:2 ratio. However, the dispute was whether to take the gross receipts or the net income as the basis of calculation.
The Prime Minister’s Office (PMO) had earlier suggested that both entities should share the revenue after taking care of the expenses incurred by the carrier to operationalise the project.
MoHUA, however, wrote to Ashwani Lohani, chairman, Railway Board: “The Cabinet note does not give any concrete financial model and, therefore, the principle of sharing of ‘net surplus revenue’ for these projects involving DDA land cannot be estimated with any degree of reasonable accuracy. Therefore, on the basis of the arrangement proposed by railways, cash flow to DDA cannot be assessed. Moreover, this will have uncertainty on the returns to DDA. Therefore, the sharing should be on the basis of ‘gross receipts from the project’ and the sharing formula can be worked out in consultation.”
According to sources, the railways has now asked MoHUA to clarify what elements should be considered as ‘gross receipts’. The railways also discussed the detailed project reports of both the stations with the DDA.
The DDA is of the view that share of net surplus is not a viable option because it may be the case that after all expenses of the railways are deducted, the net is negligible. It reckons that land should not be given “at such cheap rates” to the railways given that the authority does not receive any budgetary support from the government and manages its affairs through generating money from its own assets.
Bijawasan and Anand Vihar are among the first few stations that were put up for redevelopment. For these two stations, requests for quotations were floated in May 2016 and a year later requests for proposals were invited. However, the project did not take off since the DDA did not make the necessary changes in land rules.