The railways will require a whopping Rs 8.56 lakh crore between 2015 and 2019 in various sectors to get up and running at full steam.
The railways will require a whopping Rs 8.56 lakh crore between 2015 and 2019 in various sectors to get up and running at full steam.
The big question is: where is the money going to come from? The private sector has not bitten the bullet so far as they smell profit only in last-mile port connectivity and nowhere else, say officials.
Railway minister Suresh Prabhu is betting big on Special Purpose Vehicles (SPVs), like the Mumbai Rail Vikas Corporation (MRVC).
dna takes a look at whether SPVs are the best way forward.
First, what is an SPV?
A Special Purpose Vehicle is a project-specific joint venture between two or more entities. The MRVC – a joint venture between the railways and the Maharashtra government – is an example. One advantage of an SPV is that it can raise money from multilateral agencies and foreign governments and does not have to depend on state and Union budgets alone.
What are its advantages?
Here's what Dr PC Sehgal, former managing director of MRVC, has to say: "An SPV, like MRVC, has a singular vision to get projects in its kitty completed without having to bother about other elements of railway work. This quality also makes it easier for SPVs to raise funds from various resources as lenders know they have to deal with just the SPV and not a whole host of government agencies. When it comes to executing a project with many stakeholders, SPV is the best way."
So, what does Suresh Prabhu's SPVs mean?
Prabhu, during his budget speech, charted out a four-pronged strategy to raise finances over the next few years. Firstly, it involves partnering with state governments for state-specific projects. Then, there's co-ordination with Public Sector Units for transporting critical items like coal, iron ore, steel, cement etc.
The third tie-up is with multilateral organisations and foreign governments for long-term finance and technology. The fourth way is to work along side the private sector for last-mile connectivity, and to expand the railway fleet and modernise station infrastructure.
Is SPV the best way for railways?
Railway officials, serving and retired, believe so, given their experience in phase 1 and 2 of the Mumbai Urban Transport Project (MUTP). In this case, the SPV is MRVC. A railway official pointed out another advantage of an SPV. SPVs, as in the case of MRVC, gets a consolidated fund which allows officials to use their own discretion to spread it among a slew of projects to ensure that the work gets completed at the fastest time.
How has the MUTP fared so far?
Though several of its projects have exceeded deadline, officials say it is still among the best examples of how a wide gamut of projects on the suburban system were completed with money from the state, centre and the World Bank. The first phase of MUTP, worth Rs 4,500 crore, has been completed, while the Rs 8000-crore phase 2 is currently on. Around Rs 2,300 crore have already been spent on it.
How much money is yet to be realised?
Around Rs 2,500 crore for buying trains, Rs 1,000 crore for the 5th and 6th line between CST and Kurla and Rs 1,000 crore for the 5th line between Mumbai Central and Borivali are yet to be realised. In the budget, Prabhu announced a token allotment of Rs 1 crore, with another Rs 1 crore coming from the state government, for the Rs 11,441-crore phase 3.
Announcements are alright. What about allotments?
As reported by dna on its February 28 edition, though the allotment for Maharashtra runs into several thousand crores of rupees, the allotment made in the Pink Book -- the book that details the works and money allotted for a particular year -- is fairly paltry. This, officials said, is because of the precarious condition of railway finances.
Some examples?
Yes, the Rs 1,200 crore Karad-Chiplun work has been allotted Rs 1 lakh. The Pune-Lonavala 3rd line, costing Rs 800 crore, has been allotted only Rs 18.29 crore in the Pink Book. The highest amount allotted in the Pink Book is Rs 206.78 crore – for the 467-km Pune-Miraj-Londa land- doubling project, expected to cost Rs 4,670 crore. Even platform extension at CST, to make it 24-train compatible, has got only Rs 1 lakh against a total of Rs 57 crore. Extension of platform cover at suburban stations has been given Rs 50 lakh or just 10% of the total cost of Rs 5.1 crore. The Rs 23.43 crore work to replace foot-overbridges has been given Rs 70 lakh.
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