SPV for Rs 22,000 cr rail corridor

The government is planning to set up a special purpose vehicle (SPV) for the proposed Rs 22,000-crore rail freight corridor by March 2006. The debt-equity ratio of the SPV, to be modelled on the lines of the Delhi Metro Rail Corporation, is expected to be 70:30.

Railway ministry officials said the project maybe included in the works programme for 2006-07 and is likely to be part of the Budget for next year.

Railway Minister Lalu Prasad had recently announced the project for constructing a dedicated corridor for carrying freight on the Delhi-Mumbai and Delhi-Howrah routes.

"While Rail Vikas Nigam was a possible agency for implementing the project, it was felt that it had too much on its plate and an SPV was a better option," a ministry official said.

With the proposed debt-equity ratio, the SPV would be able to raise about Rs 15,400 crore, while the rest would be provided through equity. State-owned coal, steel and power companies may also chip in with funds to finance the project.

Officials, however, said this was only an initial estimate and the real picture would emerge only after Rites submitted its report on the corridor. Rites has been asked to submit a feasibility report on the corridor.

Regarding the negotiations for loan assistance from the Japan Bank for International Co-operation (JBIC), officials said the details would be finalised only after Japan International Cooperation Agency (JICA) submitted its report.

"The JICA team was here last fortnight for the first round of collecting information for its feasibility reports. There will be few more such rounds, after which the process for preparing the report will start," a ministry official said. It is likely that the SPV would start the groundwork even before JICA has submitted its report.

There are several loan options available where JBIC can provide assistance for the whole project or for a third of the project cost. This, however, can be decided only after JICA submits the feasibility study.

One of issues that both the Rites and Jica studies are expected to resolve is whether the new corridor should be built on the existing line or on a new alignment. If built on the existing lines, the railways could use the existing infrastructure and avoid the administrative hassles pertaining to large scale land acquisition.

A new alignment would require railways to acquire vast tracts of land that could lead to huge delays. However, if the existing lines were used, it could defeat the very purpose of having a dedicated corridor.