Indian Railways has put on hold a project to develop 100 budget hotels on railway land. The estimated cost for 20 such hotels—tenders for which were awarded earlier this year—is around Rs4,000 crore. But the Railway Board, the top management body of the railways, is yet to allot the winning developers any land.
The hotels were to be developed through the public-private partnership model: the railways was to provide the land and the developers were to build and operate the hotels and pay the railways a share of revenues.
The decision to build hotels appeared like a good use of surplus railway land (Indian Railways has considerable surplus land across the country). An economy that is growing at more than 9% has resulted in an increase in the number of domestic and international travellers. This has increased demand for hotel rooms, especially in the budget (or affordable) category.
Sudhir Kumar, officer on special duty to railway minister Lalu Prasad, had previously said that the department planned to “leverage surplus land and use the revenue earned to run better trains and provide modern amenities for the passengers.”
Early this year, the ministry awarded 20 tenders for construction of hotels; now, it has decided to put these on hold.
Companies that were awarded tenders include consortia of GL Hotels Ltd and Pan India Paryatan Ltd; Zoom Royal Orchid; and Signet Hotels.
“I just have no clue as to what we are supposed to do. We have letters of approval from the ministry but are not being allotted land. How long can we wait?” asked one of the successful bidders who did not wish to be identified.
In a related development, the managing director of Indian Railways Catering and Tourism Corporation P.K. Goel, who was coordinating these projects, was asked to proceed on leave by railway minister Lalu Prasad Yadav. Goel said he was “not in the loop” regarding the fate of these hotel projects. IRCTC acting managing director Nalin Shinghal said he was not willing to discuss the budget hotels project.
Meanwhile, the Rail Land Development Authority, a newly set up entity mandated to develop surplus land owned by the railways, has claimed that it should be allowed to handle the hospitality projects.
“How can that be allowed? IRCTC has a mandate from the cabinet to implement these projects,” said a railway official who did not wish to be identified.
Kumar said the ministry was aware of the problems pertaining to the budget hotels and they were being resolved.
A person familiar with the development said the minister was concerned that his political opponents may point out flaws in the tendering process, even if these were perceived ones, and tarnish his and his party’s image before the elections which, according to some political analysts, could happen as early as next year. This person did not wish to be identified. The minister was unavailable for comment.
Railway Board chairman K.C. Jena refused to take calls to discuss the issue.
“It is quite likely (Indian) Railways may not go ahead with the project at all if the minister is not convinced,” said a member of the Railway Board who did not wish to be identified.