Railways to partly develop Stations, to lease them out to Private Players for 99 years

The redevelopment of 600 stations was mentioned by Finance Minister Arun Jaitley in his Budget speech this month. While the redevelopment project is estimated to cost over Rs 1 lakh crore for 600 stations, IRSDC will tap into market sources for funds. Besides commercial use, the ministry also plans to allow residential use of its land around the stations.

NEW DELHI: The railways has come up with a new plan to involve private players in its ambitious scheme to redevelop 600 stations across India. According to the plan, the Railways will carry out 25-50 per cent of the construction work, and then give the station on a 99-year lease to the highest bidder for completion, development and subsequent operation.

Besides commercial use, the ministry also plans to allow residential use of its land around the stations.

The proposal has been sent for Cabinet approval and is likely to be discussed at the next meeting, said sources. If approved, it is expected to kick-off simultaneous construction work at stations across the country.

The redevelopment of 600 stations was mentioned by Finance Minister Arun Jaitley in his Budget speech this month.

In the first phase, Railways arms like the Indian Railway Station Development Corporation (IRSDC) and zonal units will take up about 130 stations.

The IRSDC will develop about 10 types of designs, which will be followed at all the stations.

According to the plan, the IRSDC and Divisional Railway Managers will redevelop the main station facilities. After that, the station, along with its land parcels, will be put up for bidding. The government has sanctioned Rs 3,300 crore in the Budget for kicking off the initial process.

While the redevelopment project is estimated to cost over Rs 1 lakh crore for 600 stations, IRSDC will tap into market sources for funds.

Sources said work is expected to begin in the next few months.

“In the scenario that a station does not find a bidder even after we have completed half the construction, IRSDC has the mandate to complete the project and take over the operation of the station and earn through it,” said a senior Railways official.

The new model was devised by the ministry following deliberations with infrastructure and real estate majors like Shapoorji Pallonji Group, DLF, Reliance Infra, Hiranandani Developers and GMR Group since October last year, after Railways Minister Piyush Goyal mandated a new strategy to make the station redevelopment scheme a success. Recently, Goyal and ministry officials also discussed the issue with architect Hafeez Contractor.

This is in addition to the existing model of bidding out stations to private developers on “as is where is” basis. This model, however, has not been able to galvanise the tepid real estate sector. The last, and the only station so far, that was successfully bid out to a private player was Habibganj in Bhopal, where the local developer, Bansal Group, will develop and operate the station for eight years and get the lease for development of four adjacent land parcels for 45 years. The department had also invited bids for the Jammu and Kozhikode stations.

Last year, Railways changed its classification scheme of 7,000 stations across the country to make footfalls, and not commercial earnings, the guiding benchmark. About 50 stations were classified as “high-value”, including the 21 busiest stations.

To set in motion a revamped station redevelopment programme, the Ministry of Railways is at present seeking approval to nominate public-sector undertakings (PSUs) in case the proposed nodal agency, its arm Indian Railway Stations Development Corporation (IRSDC), is unable to start work on multiple stations simultaneously or fails to find a financially viable plan.

To this effect, a Cabinet note for inter-ministerial consultation has been in circulation. “The ministry of railways has prepared a Cabinet note on station redevelopment, leaving room for the railways to give stations to agencies other than IRSDC if it so desires,” said an official requesting anonymity. Given that 600 stations are to be redeveloped, the railways has also proposed that IRSDC can start preliminary work of select stations to showcase the viability and then the stations can be auctioned to private builders. In case there are no takers, IRSDC will complete the project by sourcing funds.

As reported by FE earlier, the station redevelopment model is being revisited as the ‘Swiss challenge’ bidding process evoked lukewarm interest. IRSDC will now be the primary developer. The revamped public-private partnership model is expected to offer more attractive terms for private investors with longer lease period of 99 years as against the current 45 years, residential premises being part of the assets created and multiple sub-leases being allowed rather than just one. The Swiss challenge method allows unsolicited offer being made by an original proponent ensuring the best process (in terms of cost and time efficiency). Then, third parties make better offers (challenges) with the original proponent getting the right to match any superior offers.

Under the new proposal, any PSU — IRCON International, Housing and Urban Development Corporation, Rail Vikas Nigam, NBCC (India), Delhi Metro Rail Corporation — which has expertise in the field can be given the work in association with Rail Land Development Authority (RLDA). The transporter is looking for an exemption from the provision that stipulates that PSUs can’t be given projects on a nomination basis under the general finance rules (GFR). “We are looking for an exemption for expert (PSU) companies,” added the official. RLDA is empowered to identify portions of the transporter’s vacant land viable for commercial exploitation.

The exemption has been sought keeping in mind the case in which IRSDC is unable to generate enough bandwidth for all stations, apart from maintaining a healthy competition; the Railway Board will only intervene for stations in which IRSDC is not interested. In case of nomination, the railways will decide the percentage of project cost as expenses, and depending on whichever PSU is ready, the price point will be awarded projects. “The way we give out projects is that, say, 8.5% of the cost is given for staff cost, overhead expenses and profits, if at all to be made,” said the official. So for instance, if a project is awarded at Rs 100 crore, Rs 92.5 crore will be the cost and the rest will be the PSU’s expense. The GFR states there should be competition among PSUs on a service charge basis. Once the percentage of service charge is fixed, PSUs can compete among themselves.

Facebooktwittergoogle_plusredditpinterestlinkedinmail