Indian Railways – New Vistas of Growth

by - K.C.Jena, Chairman, Railway Board

Indian Railway network is the prime infrastructural sector of the country and in view of the fact that it is five to six times more energy efficient, four times more efficient in land use and significantly superior from the standpoints of environment impact and safety, compared to other transportation options, it needs to expand and develop in order to keep pace with the growth of Indian economy.
A massive investment is urgently required for the development of the railway system. The budgetary support to the railways has been increasing, but the quantum leap that the Indian Railways is seeking to undertake, requires much more in terms of resources. The high growth path that the country has embarked upon under the 11th Five Year Plan, envisages that Indian Railway would need to spend around Rs. 2,51,000 crore (US$ 62 billion) on various capacity enhancement measures over the next 5 years. A major part of the investment would come from internally generated resources and Budgetary support to the extent feasible.
However, to meet the massive investment needed, these would need to be leveraged to mobilize an adequate level of extra budgetary resources. Around Rs. 1,00,000 crore is expected to accrue from extra budgetary resources including Public Private Partnership (PPP). PPP would, thus, play a crucial role in the attainment of the strategic goals outlined above. In the past Indian Railways had made several attempts to rope in private participation in areas such as catering, wagon ownership and leasing and joint ventures for rail infrastructure projects. These efforts were, however, limited in scale and scope.
The current strategy is to leverage private capital through PPPs to the maximum extent in areas which are amenable to PPPs to improve efficiencies and control costs. To begin with the following projects have been identified to be implemented fully or partly on PPP route:

Construction of Dedicated Freight Corridor
It has been planned to construct a new Dedicated Freight Corridor (DFC), initially covering about 2700 route kms equivalent to around 5000 track kilometers with an approximate cost of Rs. 28000 crore (US$6 billion) linking the ports of western India and the ports and mines of Eastern India to Delhi and Punjab respectively.
The construction of this corridor will be implemented through an SPV which has been created for the purpose through a mix of Engineering Procurement and Construction (EPC) and PPP methods. Ministry of Railways is in the process of selecting a global consultant to advise on the concession agreement, principles of track access charges and other financing and bidding issues. It is envisaged that innovative ideas on design, construction and maintenance of railway to achieve optimal life – cycle costs would be forthcoming through PPP especially as the work progresses on the initial two corridors and further corridors are taken up. The concessionaire could also tap additional ancillary revenue streams through commercial exploitation of land, construction of freight terminal/logistic part/ICDs etc. World Class Railway StationsRailway stations at metropolitan cities and important tourist centers need to be modernized to provide world class passenger amenities and services to the multitude of passengers using these stations. Indian Railway is planning to do so by attracting private investments in the area by leveraging the land around and airspace above the stations. The concessionaire would be expected to construct and maintain the operational and passenger areas free of cost, share the revenue earned from the real-estate created and hand over the same after the expiry of the concessional period. Altogether 24 stations have been identified in the first stage. These are CST Mumbai (Carnac Bunder), Pune, Howrah (Kolkata), Lucknow, New Delhi, Anand Vihar and Bijwasan at Delhi, Amritsar, Chandigarh, Varanasi, Chennai, Thiruvananthapuram, Secunderabad, Ahmedabad, Patna, Bhubaneshwar, Mathura, Agra, Gaya, Jaipur, Nagpur, Tirupati, Bangalore and Bhopal. Pre-qualification process for bidders for the pilot project for New Delhi Station has been initiated. Redevelopment of Patna, Secunderabad and Mumbai will also be taken up during the current year. Development of other stations and green field passenger terminals would be taken up subsequently.

Commercial Utilization of Vacant Land
Indian Railways has approximately 43,000 hectares of vacant land. These are mostly situated alongside tracks in longitudinal strips, around railway stations, and in railway colonies especially in metro and other important cities/towns with the potential of being used commercially to generate revenue as well as capital for modernization and capacity addition. A new body, namely, Rail Land Development Authority (RLDA) has been set up under the Railway (Amendment) Act 2005 to pursue, inter alia, the main objectives of generating revenue and up grading railway assets. 110 sites have already been entrusted to RLDA.

Manufacturing of locomotives/coaches/wagons Units
With sustained economic growth and the resultant demand for rail transport, the requirement of rolling stock has increased manifold. The requirement of coaches/Electrical Multiple Units is projected at 22689 vehicle units for the XIth Five Year Plan. The gap between the requirement and the combined capacity of the two Production Units at Integral Coach Factory, Perambur and Rail Coach Factory, Kapurthala (around 2500 per annum) is planned to be bridged by augmenting the existing capacity of these Production Units and setting up a new manufacturing unit through a Joint Venture under PPP. Similarly, the requirement of Electric and Diesel Locomotives has been projected at 1800 each during the 11th Five Year Plan i.e. 360 locos per year. The existing in –house capacity for the manufacture of these locomotives is presently 150 per annum and can be augmented to 200 locos each per annum for Electric and Diesel locos. The gap between the requirement and capacity in this case too, is planned to be bridged by setting up two locomotive manufacturing units, one each for diesel and electric locomotives, through PPP. The possibility of PPP through long-term demand guarantee to prospective manufactures of modern wagons is also being explored. The new wagon investment scheme is another means of attracting private investment in building railway infrastructure under the PPP initiative.

High Speed Corridors
Pre-feasibility studies are being awarded for a few identified corridors to examine the linking of a few of our bustling metropolises with high speed rail links to facilitate train travel over a distance of 600-1000 km within 2.5 to 4 hours. All options including PPP will be explored towards this end.

Operation of Container Trains and Construction of Multi-modal Logistics Parks
Private operators have been allowed to manage rail-borne Container Services on Indian Railways. Concession agreement setting out the terms of such operation has been signed with 15 private operators. The scheme is also open for other operators to join. So far private operators have inducted 45 rakes and built 3 ICDs at Garihassru, Patli and Loni. Policy framework to facilitate setting up of Multi-modal Logistics Parks (MLPs) in SEZs or private land with rail connectivity has been formulated. The policy also envisages utilization of surplus railway land available at suitable locations for development of MLPs and/or bulk or dedicated freight terminals.

Port Connectivity
RVNL has been mandated to undertake capacity augmentation works and port connectivity projects by establishing Special Purpose Vehicles (SPVs). Some of the projects taken up or under consideration of RVNL include Palanpur –Gandhidham gauge conversion project (linking Kandla and Mundhra Ports to North India), Haridaspur – Paradeep New Line (linking iron ore mines of Orissa and Jharkhand to Paradeep port), Anugul-Sukinda (linking iron-ore and coal-belts of Orissa), Obulavaripalli-Krishnapatnam Port of Andhra Pradesh, Bharuch-Dahej and Surat-Hazira projects in the State of Gujarat and Penn-Rewas Port link (Maharashtsa).

Budget Hotels and Food Plazas
Indian Railway Catering and Tourism Corporation (IRCTC) has been mandated to develop catering services, budget hotels and food plazas at major stations through involvement of private entrepreneurs. IRCTC is commissioning new Food Plazas in Railway premises with private participation. The license period for food plazas is of nine years with a provision of extension for another three years. Already 53 such Food Plazas have been commissioned. Indian Railways is also in the process of carrying out an examination of the scope of need-based ‘base kitchens’ and ‘launderettes’ with public private partnership to strengthen the infrastructure for on-board services.
Call Centers are also being planned under PPP by IRCTC to cater to the need for information dissemination to the railway customers. Indian Railways is also planning to launch new services for the luxury tourism segment on the pattern of ‘Palace on Wheel’ in partnership with other interested State Governments. The above mentioned list of initiatives is not exhaustive. This is but a glimpse into the array of such activities planned by the Railways that seek to place the efforts of the Indian Railways on a more sound footing in its quest for a world class infrastructure.
Such efforts carry the potential of paving the way for the giant leap that this organization has been gearing up for over the past few years. The PPP route has well and truly opened up new vistas of growth opportunities for the Indian Railways.