Indian Railways on the right track in States with JV projects

The maximum number of projects are from Haryana, followed by Gujarat and Kerala!

NEW DELHI: Indian Railways seems to have hit upon a lucrative opportunity in forming joint-venture (JV) programmes with state governments to undertake railway projects in their territories.

Till September, 42 such projects have been identified and studies are on about their feasibility. The maximum number of projects are from Haryana (9), followed by Gujarat (8) and Kerala (8), while Odisha and Jharkhand are eyeing five projects each.

So far, 20 states have signed up for the programme launched in 2016. Out of these, 10 states —Andhra Pradesh, Assam, Chhattisgarh, Gujarat, Haryana, Jharkhand, Kerala, Madhya Pradesh, Maharashtra and Odisha—have already formed joint ventures with Indian Railways. Bihar and Himachal Pradesh have decided not to participate.

“The programme is drawing a lot of interest from companies and private investors. Companies that have manufacturing facilities in the hinterland are looking for a railway line to connect the facility with the main line. With the fluctuating fuel prices, companies are looking at cheaper transport opportunities and railways are the safest bet,” a senior railway ministry official said on condition of anonymity.

The move will also help overcome the limitation of managerial bandwidth to achieve the target of 20km/day of railway lines, he said.

A case in point is automobile major Maruti, which requires a broad gauge railway line to transport its 100,000 vehicles made every year from the Sanand manufacturing plant in Gujarat.

The company, along with the Gujarat Investment Development Corporation (GIDC), Indian Railways and Gujarat state government, are working on a ₹600 crore project to convert the metre gauge line from Kalol-Katosan-Chanasma-Ranuj. The 65km line will be developed through equity funding with Maruti and GSIDC contributing 26% each and remaining 48% shared by Indian Railways and the Gujarat government.

Other projects in the pipeline include new Railway lines Raipur-Jharsuguda via Balodabazar (310km), Ambikapur-Barwadih (182km) and linking Parsa with the east/east-west corridor (122km) in Chhattisgarh. Investors for these projects include various coal and cement companies, including Ambuja Cement.

Under the model, Indian Railways forms a joint venture with the state government with a maximum investment by Railways of ₹50 crore.

The joint venture then identifies a railway project to be undertaken, gets Union Cabinet nod and implements it with funding from private companies, public sector undertaking, multilateral agencies and private investors. For each railway project under this program, a special purpose vehicle is formed. The revenue earned from this model is then shared equally between Indian Railways and the special purpose vehicle (SPV).

Earlier in September, the Union Cabinet approved the first such JV with Chhattisgarh government. The first 295km railtrack between Katghora and Dongarhgarh will be built at a cost of ₹5,950 crore. 25% of the project cost— around ₹1,487 crore—would be shared among the four entities, with the Chhattisgarh government and Indian Railways buying in 24% equity each in the SPV and Maharashtra State Power Generation Co. Ltd (Mahagenco) and ACB India Pvt. Ltd (a coal and power generation company) holding 26% equity each. The remaining 75%, ₹4,463 crore, will be raised through debt from financial institutions.