Union Cabinet okays private sector investment in railways


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NEW DELHI: Desperate to attract private investment in the cash-strapped railways, the Cabinet on Thursday cleared the state-run transporter’s plan to rope in the private sector for building new rail lines and plants, and augment capacity, a move that was red-flagged by the unions.
 
With the policy in place, the railways will be able to get the private sector to connect ports, mines and industrial plants with the rail network by allowing them to invest in laying the tracks for last-mile connectivity. The move is expected to lower the transportation cost and help evacuate minerals, coal and finished products from the production centres.


Similarly, wherever the private sector thinks that putting up a third or a fourth line is feasible, the government can enter into a build-operate-transfer (BOT) arrangement. Sources said some of the lines could be taken up under competitive bidding through an annuity model for concession periods raging between 15 and 20 years.
 
Railways had earlier suggested that connectivity to ports and mines would be developed by the owner or concessionaire as private railway lines by acquiring land and making investments in it which could be declared non-government railway (NGR) for public carriage of goods.
 
In a statement, the government, however, said the model agreements for private participation — ranging from NGR to BOT, joint ventures and capacity augmentation via funding by customers — would be finalized soon.
 
The move comes as the railways, in the absence of fare increase, has failed to generate resources for funding modernization, leave alone capacity addition despite successive rail ministers adding new trains to appease their constituency. In fact, it has repeatedly failed to meet the targets.
 
Although the Cabinet cleared the proposal on Thursday, the government will need to get the bureaucracy on board as it has repeatedly blocked ay attempt by the private sector to get a toehold. For instance, the move to allow private container operators has proved to be a non-starter as the railways decided to give public sector player Concor priority.
 
Similarly, Lalu Prasad’s plans for PPP locomotive factories in Marhaura and Madhepura, both in Bihar, are yet to take off despite interest from companies such as GE.
 
Even this time, the unions are opposing any attempt to hand over operation and maintenance to private players, which could deter investors looking to enter the BOT space for building new lines. Citing poor finances, they are, however, not opposed to letting private players invest in infrastructure development, indicating that they are on board for an EPC-like arrangement where the private sector only builds projects, and invests in it.
 
"We don’t have any problem with private sector participation in infrastructure development. But we will oppose if railways tries to hand over operation and maintenance to private companies," said Shiv Gopal Misra, general secretary, All-India Railwaymen Federation.

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