Railway Ministry slashes Private Freight Terminal (PFT) fees to woo investments

Application fee cut from Rs 1 crore to Rs 10 lakh in drive to liberalize policy, attract private-sector participation in Railways

New Delhi:  The railway ministry has begun liberalizing its private freight terminal (PFT) policy, dismantling entry barriers by slashing application fees and one-time charges to attract greater private-sector participation, a railway official said on the condition of anonymity.

The liberalization of the policy is in line with the government’s emphasis on encouraging private investment in the capital-intensive railways sector and honours a pledge made in the railway budget.

PFTs are platforms that handle third-party freight.

The application fee for private companies to develop and run these terminals is being significantly reduced—from Rs.1 crore to Rs.10 lakh. This is expected to encourage more investors to participate in the plan, said the railway official.

A one-time fee for loading iron ore that stood at Rs.5 crore is also being done away with. Further, the government has done away with a stipulation that made it mandatory for a railway siding with more than one user to convert the siding for use in a PFT.

“These measures for relaxation have been decided on. However, further liberalization is also under consideration,” said the official.

The railways has received 56 applications for PFTs since 2010. So far, 21 PFTs have become functional and they have brought in Rs.300-500 crore in private investment.

The remaining 35 applications could bring in another Rs.900-1,000 crore.

Railway minister Suresh Prabhu in the rail budget presented on 26 February said the national transporter will address the issues that are discouraging investments in PFTs.

The PFT policy was issued in 2010 and revised in 2012 to open this segment for private investment. Under this policy, a private investor can develop and operate a freight terminal on private land on the basis of a revenue-sharing model with the railways.

“We intend to address these issues urgently so that the proliferation of these terminals is not hampered. We will, in the next three months, review the wagon leasing scheme, special freight train operator scheme, private freight terminal scheme and liberalized wagon investment scheme for making them more liberal, broad-based and attractive to our partners from the private sector,” Prabhu said in his budget speech.

The railway official said the ministry is holding consultations with stakeholders on the schemes Prabhu mentioned as well.
PFTs also figure in the report of a committee on improving the financial health of the Indian Railways, headed by former banking secretary D.K. Mittal.

In a report submitted in December, the committee recommended that the Indian Railways improve multi-user access to terminals or sidings by harmonizing the policy for access to all PFTs, tracks and railway sidings.

It also suggested the creation of an empowered group in the Railway Board to assess and recommend a unified policy for freight terminals.

“Railways needs to be more pragmatic about the private freight terminal policy as it is a freight-generating resource. With increased private participation in freight terminals, the customer-facing activities will become more efficient and customer-friendly. The measures being taken to liberalize it are good, but there is room for further relaxation keeping in mind the potential this area has to attract private investment. Measures such as those suggested by the D.K. Mittal committee can be considered,” said Abhaya Agarwal, a partner at EY Llp who oversees the infrastructure practice at the consultancy.

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