SPV for Rs 523 cr Orissa rail link soon

Nine steel companies have shown interest in participating in the construction of the 98-km Angul-Duburi-Sukinda rail line in Orissa under the leadership of the Rashtriya Rail Vikash Nigam (RVNL), a fully owned subsidiary of the Indian Railways.

A special purpose vehicle will be formed soon to implement the project, which is estimated to cost Rs 523 crore. A shareholders' agreement will be signed in this regard in the last week of November. Work on the project is expected to start early next year and be completed by 2010.

This will be the second rail project in the state to follow the public-private partnership model after the Rs 598-crore Haridaspur-Paradip rail link. Nine public and private sector companies, including Posco, SAIL, RVNL and Paradip Port Trust, recently signed a shareholders' agreement for the 82-km rail link.

The Angul-Duburi-Sukinda line will be a vital link between the coal mines in the Talcher area and the iron ore mines at Banspani.

With a number of steel projects coming up in the Angul and Duburi areas, the proposed line will not only secure the requisite traffic guarantee but will also be remunerative. According to a study, the rate of return for the project is pegged at 20 per cent.

Of the total project cost of Rs 523 crore, the equity portion is estimated at about Rs 250 crore. RVNL will be the lead promoter with an equity investment of 30-35 per cent, while the rest will be subscribed by other partner companies.

The steel companies that have shown interest in the project include Tata Steel, Essar Steel, Arati Steel, Visa Steel, Monnet Ispat, Jindal Stainless Steel, Jindal Steel and Strips, Bhusan Power and Steel and Bhusan Steel and Strips Ltd.

All the interested parties have been asked to specify their equity participation and traffic projection within the next ten days for finalisation of the shareholders' agreement. The land required for construction of the rail line is estimated at 1,530 acres.