Centre kick-starts FDI, PPP in Railways; begins work with Model Concession Agreements

New Delhi: Attracting foreign direct investment (FDI) in the Railways is finally getting the push with the government. The Railways ministry is initiating a move to create model concession agreements in order to kick-start the process of attracting FDI and private investments, close to 8 months after it came up with sectoral guidelines for such investments in November.

The ministry has just started the process of appointing consultants for preparing model concession agreements for those areas where private and foreign investments have been allowed.

Areas where such investments would be allowed are operation of private passenger trains, concession of standalone passenger corridors, construction, upgradation and maintenance of any new or existing freight terminal owned by the Railways, setting up of technical training institutes, testing facilities and laboratories and technological solutions for level crossings and for improving safety and reducing accidents.

“For the purposes of this assignment, the consultants are expected to go through best possible international and domestic agreements of a similar nature and suggest a framework which will be acceptable to stakeholders including financial institutions,” the document for consultants who would prepare model concession agreement said.

For concession of standalone passenger corridors, the asset would be transferred to a special purpose vehicle at a pre-specified nominal value and the concession period will be for a period between 10-15 years.

For freight terminal projects as well there would be a transfer of assets and the revenues would be shared under the concession agreement.

While model concession agreements already exist for urban rail systems and construction of private lines, many of the permissible activities detailed in the sectoral guidelines will require preparation of concession agreements under which investments can be made.

According to the Dibek Debroy committee which submitted its report in June, earlier policies of Indian Railways for private ownership of rolling stock have not brought in the desired level of investments, primarily due to the perception of a lack of level playing fields.

The government had earlier decided to allow FDI in areas like suburban corridor projects through PPP, high speed trains, Mass Rapid Transport Systems, dedicated freight lines, rolling stock including train sets, locomotives or coaches manufacturing and maintenance facilities, rail electrification, signaling systems, freight and passenger terminals and facilities to manufacture railway lines or sidings.