Railways require capital infusion

S C Agnihotri, Managing Director, Railway Vikas Nigam Ltd (RVNL) points out that infusion of private capital in augmenting infrastructure can break the vicious cycle of poor productivity, underinvestment and poor realisations in Indian Railways during his exclusive conversation with INFRASTRUCTURE TODAY. Excerpts:

What challenges do you face during the execution of projects?
Major challenges faced by Railway Vikas Nigam Ltd (RVNL) during the project execution stage are land acquisition, forest clearance, timely approval of plans and drawings by Indian Railways, grant of traffic restrictions during execution by the railways, issues between Commissioner for Railway Safety (CRS) and Zonal Railways or Railway Board, local law and order problems particularly in Naxal-affected areas, site specific technical issues, topography of the project area, duration of working season, especially in high rainfall areas etc. Apart from these, we also face hurdles in getting licenses for mining of earth, blanketing and ballast – some states consider them as minerals and they send every case to their respective Chief Minister for approval.

What are the projects in pipeline and what kind of opportunities will it create for consultants, vendors and developers?
RVNL has a variety of projects in pipeline, such as:

There will be opportunities for consultants with specialised knowledge, skill and expertise in different technical areas such as tunnelling, project management and supervision, designing of structures, etc. It will also generate opportunities in non-engineering sectors such as project appraisal, financing, bankability, etc.

When it comes to execution of a railway development project, which model is feasible? What are the pros and cons of PPP in railways projects?
Indian Railways has considerable expertise in undertaking project development department-wise. Usually, the projects are always funded by the railways itself through internal resources. Now, India Railways is exploring a number of innovative models. The new policy on private participation contains five models for different categories of projects, as follows:

• Non-Government Railway Model
• Joint Venture (JV) model for operationally necessary or bankable sanctioned railway projects appearing in the Pink Book
• Railway projects on BOT awarded through competitive bidding,
• Capacity augmentation (Doubling/Third line/Fourth line etc.) with funding provided by customers
• Capacity augmentation (Doubling/Third line/Fourth line, etc.) – annuity model It is not necessary that these models will suit every situation. Each of these models has its own specifications and accordingly it will be better suited under specific conditions.

PPP in Indian Railways is a welcome initiative. A well-conceived partnership of public and private funds, skills and requirements will result in a win-win situation. As Indian Railways is starved of funds and unable to provide service at an expected level, infusion of private capital in augmenting infrastructure can break the vicious cycle of poor productivity, underinvestment, and poor realisations.

What technological advancement would you foresee for modernisation of Indian Railways?
A large number of technological advances are being implemented by all technical departments. The end result required is increased safety, improved reliability and increased productivity, at least cost and in a sustainable manner.

Rate of return on Mumbai-Ahmedabad bullet train project is projected to be only around three-four per cent. Can you please tell how economically viable is this project and how is the ministry going to raise funds for this project?
High Speed Rail Projects in all countries have been funded by their governments, sometimes with the aid of other countries and/or multi-lateral agencies like World Bank. Such projects help in accelerating the economic development of the country. They also help in decongestion of Metros, growth of new urban and commercial centres, reduced pollution by diverting car and air passengers to rail transport, thus improving the quality of life. The economic rate of return of Mumbai-Ahmedabad High Speed Rail project is likely to be far higher than four per cent (exact figures will be known only after the final report of Japan International Cooperation Agency (JICA) is presented in June 2015) once the benefits accruing to the society are counted. Funds can be arranged through the State Government, multi-lateral funding agencies, bilateral agencies, Gross Budgetary Support, under PPP scheme, etc.

Please give us an update on projects that will augment rail road connectivity with ports?
RVNL has formed five Special Purpose Vehicles (SPVs) for connecting ports.

• Kutch Railway Corporation Ltd- Kandla and Mundhra
• Bharuch Dahej Railway Company Ltd- Dahej Port, Gujarat
• Krishnaptanam Railway Company Ltd,- Krishnaptanam Port, AP
• Haridaspur Paradip Railway Company Ltd – Paradip Port, Orissa
• Angul Sukinda Railway Company Ltd – Paradip Port, Orissa

Out of the above, Kutch Railway and Bharuch Dahej Railway are fully operational, and part of Krishnaptanam Railway (between Krishnapatnam Port and Venkatchalam station) is operational. Other two projects are under construction.

RVNL and Dighi Port Ltd have signed an MoU in April 2015 to form an SPV to connect Dighi Port with Roha on Central Railway. The SPV will construct a 38 km long line that will have about 4.2 km of tunnels and over 80 major and minor bridges. Estimated cost of the project that will be funded by a mix of debt and equity is Rs 8,000 crore.

Rail Vikas Nigam Ltd (RVNL) has planned to raise Rs 379 crore through market borrowing. How is RVNL going to utilise these funds?
RVNL does not raise any funds directly from the market. Funds are either raised by its SPVs for their own projects where RVNL is an equity stakeholder, or by Indian Railway Finance Corporation (IRFC) for projects being constructed for Indian Railways. IRFC then gives a loan to RVNL. All funds are utilised only for construction of new railway assets.