Railways plan to outsource track laying

Move would help Railways avoid a possible funds crunch for this Rs 22,000 cr project.

The Railways are considering outsourcing construction of tracks for the 2,700-km dedicated freight corridor project. Under the plan, the railways will identify stretches of up to 100 km and invite companies to bid for laying tracks in them on a build-operate-transfer basis.

This way, the railways will avoid a possible funds crunch for this Rs 22,000 crore project. The railways appear to have followed the National Highways Authority of India for funding highway development project.

Under the proposal, the consortiums which lay tracks in these stretches will be paid annuities and user charges by the railways with concession periods ranging between 25 and 30 years.

The east and west freight corridors may be divided into stretches of roughly 100 km each. The project cost of every 100 km stretch is expected to be about Rs 1,000 crore.

The railways, after discussing the proposal with the Planning Commission and other stakeholders, will decide whether to adopt this mode of funding or not. If the proposal is found to be acceptable, then it will be included in a Cabinet note being prepared for the formation of a special purpose vehicle for the dedicated freight corridor.

Since the ministry has already issued licences to private container trains, many of the container trains that will ply these tracks laid by the consortiums will also be privately owned.

"We feel that by inviting private financing initiatives for the dedicated freight corridor project, the ministry can save valuable capital that could be used to finance other important projects instead of locking in funds on one project,' an official said .

The contract bids will be processed and awarded by an SPV which will be formed by the ministry for construction of the dedicated freight corridors.

The ministry will also open an escrow account in favour of this SPV. Depending on the freight revenue generated by trains using these stretches, the railways will pay user charges to the consortiums through the escrow account.

Apart from annuities, the user charges will be disbursed between the various consortiums by the SPV in the form of Track Access Charges. The TAC will be a share of the freight revenue that was generated on the stretches operated by the private consortiums.

All the stretches will have a stipulated completion period of five years and the companies will earn incentives if they complete their stretch before deadline.