The recently announced Union Rail Budget has announced several policies that would involve participation of private players in the railway sector providing it the much-needed impetus .jpg) Of late there has been an increasing demand from several quarters to facilitate private participation in the Indian Railways. The Planning Commission anticipates a staggering investment of about Rs 2,00,802 crore in railways during the Twelfth Five Year Plan (2012-17).As per the Ministry of Railways Vision document, it has been anticipated that 64% of the expenditure is needed for capacity expansion, upgradation and modernisation of railways in the next 10 years. The same could be achieved by railways via high earnings through growth in passenger and freight traffic as well as use of public-private partnership (PPP) models.Focus on private participation in the Railway Budget
The 2010 Rail Budget has laid special emphasis on private partnership for growth of railways in India. While the Union railway minister has clarified that railways will not be privatised, the role of the private sector in enabling the Indian Railways to achieve its Vision 2020 targets has been emphasised. Vision 2020 aims to add 25,000 kms of new railway lines in the next 10 years backed by funding from the government and calls for major involvement of private players. A new business model with greater participation from the private sector has been emphasised upon, which will boost the economy and will also help in improving the railway finances considerably.
A welcome announcement is the proposal to set up a special task force to clear investment proposals within 100 days to tackle administrative and procedural delays. Focus is to make railway projects more lucrative for private firms.
The Rail Budget 2010 has announced setting up of new diesel and electric locomotive factories at Marhowrah and Madhepura in Bihar and at Dankuni in West Bengal under the PPP model.
A look at private involvement in the railway sector worldwide indicates that in many countries, railways have undergone major restructuring and liberalisation. This has been instrumental in improving their efficiency, productivity and helped countries achieve global competitiveness, especially at a time when railways were losing market share to other sectors.
Emerging opportunities
Private sector participation is today a fundamental component of Indian Railways infrastructure upgradation and modernisation programme. According to consulting firm Frost & Sullivan’s strategic analysis of the growth opportunities for the railway sector, revenues earned by Indian Railways are expected to touch US$65 billion in 2014 from US$48 billion in 2009.
Major projects coming up for private sector participation include:
Ø Development of world-class stations
Ø High-speed corridors
Ø Rolling stock manufacturing units
Ø Multi-modal logistics parks
Ø Metro Rail projects
Ø Newline/doubling and gauge conversion projects
Ø Connectivity projects to connect coal and iron ore mines
Ø Setting up of bottling plants for portable drinking water
Ø Construction of multi-level parking complexes at stations
Road ahead
To increase private participation in the rail sector, the following points should be considered:
Ø A consistent policy for private participation
Ø Non-politicisation of projects
Ø Attention to monitoring timely implementation of projects
Ø All clearances to be met timely with provision for deemed clearance and/or exit clause
Ø Follow international bidding practices
Ø Assure reasonable return on capital deployed
Ø Centre-state coordination is important to ensure successful implementation of projects
Ø Provide investment incentives to attract foreign direct investment
Ajay Sinha, regional director - Corporate Development, EMD Locomotive Technologies Pvt. Ltd (Subsidiary of Electro-Motive Diesels, Inc.) a leading manufacturer of diesel electric locomotives headquartered in LaGrange, Illinois in the US |
