Railways moots 4 models for private play in expansion

Indian Railways has proposed four public-private partnership (PPP) models — cost-sharing freight rebate, full contribution, SPV, and private line — for network expansion.

A meeting is scheduled for April 17 between rail ministry officials and representatives of private sector companies on the issue.
Termed as Railways Infrastructure Initiative for Industry (R3i), the scheme to develop the rail lines is focused on incentivising the private sector to work in tandem with Railways and provide connectivity to the areas that are not covered.
As per the cost-sharing freight rebate model, the contribution of the applicant should not be less than 50%.

 “The applicant will recover its investment through a rebate of 10-12% on incremental traffic. This will be valid till the advance contribution made by it is recovered or for a period of 10 years, whichever being earlier. This is, however, subject to the condition that 30% of the advance should be recovered within the first five years after the commissioning of the line,” said the draft policy document on R3i.

In the full contribution apportioned earning model, the applicant will make 100% contribution to the project cost. The applicant will construct and maintain the line for a period of 25 years.

“Railways would levy a licence of 2% from the applicant’s share of earnings net of operations and maintenance (O&M) costs for the first 10 years from the date of commissioning and 4% thereafter till the completion of 25 years,” it said. At the end of the 25 year period, the revenue would accrue to the Railways. In the SPV model, the Railways’ share in the special purpose vehicle will be 26%. “SPV shall be granted a concession, a share in the revenues generated on the project line, in lieu of construction, operation and maintenance of the line,” it said.  Private line model would apply when a private line is built by the applicant on privately acquired land and connectivity is sought to the Railways’ network. The applicant will construct and maintain the line for a period of 30 years and pay licence fee of 2% to 4% to the Railways through the period.