Sticking to a strategy of focusing on core operations and exiting from ancillary activities, the Indian Railways will only operate as a junior partner with a 26% stake in four new production units manufacturing wheels, locomotives and coaches that are to be set up as joint ventures with private companies.
The new units are expected to require an investment of Rs4,000 crore. The ministry plans to invest around Rs500 crore.
A wheel factory in Chapra, a diesel locomotive factory at Marora, an electric locomotive factory at Madhepura in Bihar and a coach factory at Rai Bareilly in Uttar Pradesh are the projects for which the ministry is planning to tie up with private players.
“There will be no joint ventures in existing production units and we are inviting private players only for the new units,” clarified a railway official close to the proceedings who did not wish to be identified.
A proposal for such joint ventures was announced by railway minister Lalu Prasad while presenting the railway budget for 2007-08 earlier this year.
The ministry has appointed PriceWaterhouseCoopers as consultant for the project. Tenders for participation in these projects, the official added, will be floated once the consultant submits its report.
According to another railway official, the management and control of these units will be vested with private players.
“We will give them commitment in terms of an annual order, and equity,” the official said. Existing production units of the railways will be allowed to buy technology from the new units, but purely on commercial terms,” the officer added.
“The railways earlier were involved in all elements... by manufacturing wagons and wheels for instance. But, these are specialized activities and it is important to improve technology by getting partners who have better technology,” says Arvind Mahajan, an expert on infrastructure with consultant KPMG.
The railways expects the number of passengers to increase from 6,400 million in 2006-07 to 8,400 million in 2011-12. Similarly, freight traffic is expected to increase from 726 million tonnes (mt) to 1,100mt in that period.
The railways has also doubled its outlay for rolling stock from Rs26,915 crore in the 10th Plan to around Rs59,120 crore during the 11th Plan. A major portion of this increased allocation is expected to be raised from the private sector through public-private partnerships.