With insufficient government resources to carry out infrastructure development, the Railways has decided to rope in private players.
Stating that a large backlog of sanctioned projects has been built up because of funding issues, railway minister DV Sadananda Gowda, while presenting the Railway Budget said that the government would go in for public private partnerships (PPP) and foreign direct investment to meet its needs.
“Growth of railway sector depends heavily on availability of funds for investment in infrastructure. Internal revenue sources and government funding are insufficient to meet the requirement. Hence, the ministry of railways is seeking Cabinet approval to allow FDI in rail sector,” said Gowda.
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While the Railways has not been successful in the past in raising enough resources through the PPP mode, the government seems confident of doing so in the future as Gowda made it clear that projects including high-speed rail would be financed through this mode. “Railways will interact with industry and take further steps to attract investment under PPP through build-operate-transfer (BOT) and annuity route and 8 to 10 capacity augmentation projects on congested routes will be identified for this purpose,” he said, adding that zonal Railways will be empowered to finalise and execute such projects.
While private investment and customer funding for some port connectivity projects and some power sector projects has started, he said that much more needs to be done if infrastructure creation has to keep pace with the requirement. PPP has been on the Railways’ agenda for several years but it has not been able to take off as Railways has not been successful in giving out PPP projects and experts feel that some effort will be required on that front.
“During the period where India has developed one of the largest PPP programmes in the world the performance of the Railways in giving out PPP projects has been dismal. Railways has approached PPP as a resource generation model but unless there is a significant shift in the approach of railway towards PPP it is unlikely that PPP projects will seek much traction. Clear success of some high profile PPP projects in the Railways may lay the groundwork for projects in the future,” said Vishwas Udgirkar, senior director, Deloitte Touche Tohmatsu.
On FDI, the government has clarified that it would not be permitted in rail operations and a draft Cabinet note for inter-ministerial consultations has proposed to permit FDI in high-speed train systems, sub-urban corridors and freight lines connecting ports, mines and power installations. The development, however, seems to have enthused industry experts. “Having private sector participation and opening gates for FDI will give desired boost to Railways,” said Nalin Jain, business leader, South Asia, GE Transportation.