Railways PPP projects go off track

The Railways' ambitious plan to raise Rs 1,00,000 crore (Rs 1,000 billion) in the Eleventh Plan (2007-12) to develop rail infrastructure projects through public private partnerships appears to have gone badly off track. Most key projects are still to get started, mainly because of the inability to get a fix on a viable PPP policy.

The ambitious Rs 50,000 crore (Rs 500 billion), 3,289 km Dedicated Freight Corridors are a case in point. Although the project started under former railway minister Lalu Prasad and was renamed Diamond Rail Corridors by incumbent Mamata Banerjee, not a single project has been awarded yet.

These corridors were to be built on an east-west axis, with one leg connecting Ludhiana in Punjab to Dankuni, West Bengal (the eastern corridor) and the other Jawaharlal Nehru Port Trust, near Mumbai to Tuglakabad, Delhi (the western corridor).

Japan Bank for International Cooperation and the World Bank have extended financial assistance of Rs 28,000 crore (Rs 280 billion). The ministry intends to raise the remaining Rs 22,000 crore (Rs 220 billion) from market borrowings through Indian Railways Financing Corporation, cost-sharing by state governments, internal resources and by attracting private investment.

Ministry officials say no tenders have been floated yet because discussions are still on to develop policies that will make PPP contracts attractive. "The PPP concept is new to us, so it is taking time," said a ministry official.

Another plan to set up joint venture factories to make diesel and electric locomotives at Marhowra and Madhepura in Bihar at an investment of over Rs 29,220 crore (Rs 292.2 billion), which Lalu Prasad announced last year, has not materialised, though bids were invited for the Madhepura factory in May 2008.

Private sector players insist the ministry modify some of the guidelines outlined in the contracts. Chief among these is the clause that the private sector must deliver and maintain the locomotives manufactured at these factories, said a source on condition of anonymity.

"That would involve setting up depots across the country which would make the project unviable," the source added. The railway ministry has also called a halt to 20 contracts worth Rs 4,085 crore (Rs 40.85 billion) that the Indian Railway Catering and Tourism Corporation Ltd had given to private players to develop budget hotels.

Ministry officials say building budget hotels is being considered a part of the construction of multi-functional complexes near world-class stations rather than as stand-alone projects.

"Policy changes are underway," said one of them. Adding to the confusion is the lack of clarity on who will have jurisdiction over the project -- the Railway Land Development Authority, which is responsible for developing new stations, or IRCTC, which is overseeing the construction of the hotels.

Presenting the Budget this year the railway minister had said the Railways would upgrade 50 stations under the PPP scheme.

Of these, Delhi station was seen as a test case for PPP projects.

But the Rs 6,000-crore project has been stuck for the last two years for want of approval from local bodies such as the Delhi Development Authority, New Delhi Municipal Council, Delhi Traffic Police and so on.

A Northern Railway official explained, "The local bodies are concerned about the traffic congestion the project would create.

They are objecting to the real-estate development of the land around and airspace above the station. We have not received a positive response from them yet."

The railways had invited RFQs (Requests for Qualification) from companies in October 2007 for the Delhi project. They were scheduled to award the contract in July 2008 but the government scrapped the RFQ in October 2008 owing to confusion over certain clauses in the bid documents.

In the Tenth Five Year Plan, PPP projects by the Indian Railways constituted less than one per cent of the total plan outlay. The projections for the Eleventh Plan is 20 per cent. Given the all-round policy confusion, the Indian Railways is unlikely to achieve this target.