9 firms seal Rs 598 cr rail deal

Nine public and private sector companies, including steel majors Posco, SAIL, infrastructure developers Rashtriya Rail Vikas Nigam Orissa Industrial Infrastructure Development Corporation and Paradip Port Trust (PPT) on Wednesday signed a shareholders' agreement for the construction of 82 km Haridaspur-Paradip broad gauge rail link in Orissa at a cost of Rs 598 crore.

The project, slotted as one of the port connectivity ventures under the National Rail Vikas Yojana, is estimated to cost Rs 598 crore.

A special purpose vehicle (SPV), Haridaspur Paradip Railway Company (HPRC), has been formed with an equity base of Rs 275 crore to implement the project. RVNL, a wholly-owned subsidiary of Indian Railways, is the leading promoter of the SPV with an equity subscription of Rs 133.20 crore (48.43 per cent).

The equity subscription of other partners in the SPV is Posco (10 per cent) PPT (10 per cent), Essel Mining Industries Limited (10.91 per cent), Rungta Mining and Industries Limited (10.91 per cent), MSPL Mining (5.45 per cent), Jindal Steel and Power Limited (1.82 per cent), SAIL (1.82 per cent) and Idco (0.66 per cent).

Of the total cost of Rs 598 crore, Rs 456 crore will be invested in the construction of the rail line, while the rest will be spent on land acquisition. Nearly 70 per cent of the land for the rail line has been acquired and handed over to East Coast Railway. The equity money apart, the company will depend on non-recourse debt to finance the project.

The equity partners in the SPV are stakeholders in the project as well as users of the rail line. Each user has agreed to provide traffic guarantees for movement of its traffic on the proposed rail line. The provision of such traffic guarantee by the strategic partners is likely to provide adequate comfort to the lenders and ensure project viability. RVNL had also conducted a traffic appraisal study with Feedback Ventures Pvt Ltd, New Delhi, as consultants. About 19 mt traffic is expected to move on the line each year.

The broad gauge rail link will traverse through three districts "" Kendrapara, Jajpur and Jagatsinghpur "" establishing a direct link between the iron ore-rich areas of Orissa and Paradip Port, shortening the chargeable distance by 335 km in comparison with the existing route via Kharagpur. This is expected to make the export of iron ore from India more competitive.