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For Railways projects, govt turns to PPP model, SPV route

The PPP mode of executing works in Railways has not had the desired results in the past, despite several initiatives.

Written by Avishek G Dastidar | New Delhi | Published: July 6, 2019 4:41:44 am
union budget, budget railways, nirmala sitharaman, sitharaman railways, rail budget, PPP in railways, budget rail, finance minister The redeveloped building and circulating area of the Valsad railway station in Gujarat. The station now looks new-age with modern amenities. (Express photo by Javed Raja)

FINANCE MINISTER Nirmala Sitharaman envisaged a Rs 50 lakh crore investment in the country’s rail sector till 2030, and pinned her hopes on the Public Private Partnership (PPP) model for investments, especially for financing a part of the sanctioned projects. However, the sector has seen little success in this mode of investment in the past.

“Given that the capital expenditure outlays of Railways are around Rs 1.5 to 1.6 lakh crore per annum, completing even all sanctioned projects would take decades. It is therefore proposed to use Public Private Partnership to unleash faster development and completion of tracks, rolling stock manufacturing and delivery of passenger freight services,” Sitharaman said in her Budget speech.

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The PPP mode of executing works in Railways has not had the desired results in the past, despite several initiatives. Besides, a large number of sanctioned projects in the slow lane are fraught with unattractive rates of return and terms of engagement from a private investment point of view. Currently, Railways finances its capital expenditure largely through budgetary support and some loans in the form of extra budgetary resources. Officials said the Budget implies big-ticket projects and a new model of private engagement in the future.

In the first term of the Narendra Modi government, its maiden Rail Budget, too, had intended to open the doors to PPP, but that did not go as planned. “Railways, being a capital intensive sector, has not been successful so far in raising substantial resource through PPP route… it is my endeavour to pursue this in right earnestness. It is our target that bulk of our future projects will be financed through PPP mode, including the high-speed rail which requires huge investments,” then Railway Minister D V Sadananda Gowda had said in the Rail Budget speech in 2014.

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Sitharaman’s Budget reinstates the government’s confidence in the PPP route, possibly in a new avatar, officials said.

Sitharaman has also outlined more investment through the Special Purpose Vehicle (SPV) route in the loss-making suburban rail network in cities. “Indian Railways suburban and long-distance services do a phenomenal task in cities like Mumbai and smaller cities. Railways will be encouraged to invest more in suburban railways through Special Purpose Vehicle (SPV) structures like Rapid Regional Transport System (RRTS) proposed on the Delhi-Meerut route,” Sitharaman said.


New model needed

The RRTS is being implemented by the National Capital Region Transport Corporation — a joint venture SPV between the Centre and states like Delhi, Haryana, Rajasthan and Uttar Pradesh. “I propose to enhance the metro railway initiatives by encouraging more PPP initiatives and ensuring completion of sanctioned works, while supporting Transit Oriented Development (TOD) to ensure commercial activity around transit hubs,” she said. Sitharaman also mentioned the launch of station development plan this year. Railways is already on course to engage private players to run passenger trains and station development plans in the future. Railways’ staff cost is estimated to be Rs 86,327.34 crore, up from Rs 77,599.99 crore in the Revised Estimates (RE) of 2018-19. Pension outgo is estimated to increase from Rs 48,000 crore to Rs 51,000 crore end of this fiscal, as per the Budget Estimates (BE). It has pegged a slightly increased revenue of Rs 2.16 lakh crore this fiscal, from Rs 1.97 crore in the RE. In its capital expenditure target of Rs 65,837, there is new allocation of Rs 267.64 crore for Nirbhaya Fund, including provision of Rs 250 crore for Integrated Emergency Response Management System (IERM) (Video Surveillance System), and Rs 17.64 crore for Konkan Railway Corporation Ltd.

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