Railways delays ambitious PPP train plan due to capacity, land issues

The Railway Ministry's public-private partnership plan to offer 150 pairs of trains has been pushed further as safety, capacity challenges remain

The Railway Ministry has re-evaluated the plan to offer 150 pairs of trains on a public-private partnership (PPP) mode and decided to wait.

The plan envisaged getting the trains running by early 2024. Two reasons have pushed back the deadline, said a key railway official aware of the developments. The Railways was supposed to offer land to the private operators at Rs 1, a difficult proposition in the present political circumstances. Also, the additional track capacity needed to run the trains has not come online. The Dedicated Freight Corridor Corporation of India Ltd is still struggling to get the last bits of its two corridors, the eastern and western, fully operational.

The plan was floated in January 2020 and was mentioned in the Union Budget 2020. It was to be revived in the third term of the Narendra Modi-led government. But in the present circumstances, cabinet approval for the project seems unlikely to come through soon.

Unless that happens, the Rs 30,099 crore project that was cleared by the public-private partnership appraisal committee in October 2020 could enter the long list of projects the Railways has shelved.

While the government database on PPPs approved in India shows the Railways have the second-largest set of approvals for such projects at 13, it is also true that most of these are up to 2021. The ministry has not ventured into fresh PPPs since then.

In this plan, the Railways had hoped for participation of private entities in the operation of passenger trains on about 100 paths divided into a dozen clusters, where 150 such train pairs would run. To guide the investors, a draft Request for Qualification document, Concession Agreement Guiding Principles, Project Information Memorandum, and a presentation on the salient features of the project were also put up on the Railway Ministry website.

The thrust of the plan was a "Paradigm Shift in Passenger Train Operations for World-Class Service." The documents were written after a long series of discussions with possible bidders throughout 2019.

The ministry expected the bidders to run these services on a Design, Build, Finance, and Operate (DBFO) basis.

A former senior railway official said the plan now has seemingly few backers in the current railway setup. "Those who mooted the plan have retired, and it is not clear to the new leadership why they should shepherd it." Business Standard sent queries to the Railway Ministry but received no response by the time of filing this story.

This is surprising since the ministry claimed in an internal note that it had received 120 bids for the 12 clusters. Yet, it decided not to proceed with any of those. However, these were informal bids, as cabinet approval to invite formal bids was yet to be taken.

To offer financial comfort to the bidders, the Railways had planned to offer land at Rs 1 for setting up maintenance depots and other facilities. It had acknowledged that this was a deviation from the Railway Ministry’s policy and would therefore require cabinet approval. It had also decided to offer flexible "price discovery" for the clusters. "The price discovery for the clusters in the project to be done through market forces, and there need not be a predetermined reserve price," the appraisal committee had noted while approving the project costs.

But the timelines have since been pushed back. An official said, in addition to the reasons given, “The three reasons why a private company was to be roped in were punctuality, cleanliness, and safety in the operations of these trains,” the official said. Of these, safety has become a hot-button issue. In the past few months, a series of major and minor train accidents has made Rail Bhawan tense. While there are no overarching reasons for these accidents, the ministry has decided to adopt a wait-and-watch approach before moving ahead with the ambitious PPP plan. While the 100-day timeline of projects to be completed by the Railways makes no mention of this, officials are reluctant to set even a medium-term plan for the same.

As a reason for seeking private sector participation, the Railways had noted that it would need capital investment of around Rs 50 lakh crore by 2030 for “network expansion and capacity augmentation, rolling stock induction, and other modernisation works to enable better delivery of passenger and freight services and to improve its modal share in transport.” To bridge the gap in capital funding and to induct modern technologies and improve efficiencies, the ministry planned to use the PPP model for several initiatives.

As of now, projects like the modernisation of stations, procurement of additional freight wagons, and Vande Bharat trains are the initiatives where the private sector is being involved by the Railways.