The Indian Railways is copying the highways playbook to attract private investments, from laying new tracks to building budget hotels.
The railway ministry is working on a Development Partner Model (DPM) and a Hybrid Annuity Model (HAM) which the highways sector has successfully implemented, two people aware of the development said. Under both public-private partnership models, private developers will help develop and operate selected assets, including rail lines, station redevelopment, Gati Shakti Cargo Terminals, private wagon and container rakes, maintenance depots, power projects and budget hotels.
The ministry has identified 54 projects with targeted private investments of up to ₹1.81 trillion, the people cited above said on the condition of anonymity. This will form part of the Railway's overall target of attracting ₹2.62 trillion investments under the government's national monetization pipeline (NMP).
“Both DPM and HAM models will reduce the risk of investment for private investors and allow faster expansion of PPP projects by the Railways,” one of the two people cited above said.
The models are expected to supplement existing private participation frameworks, including the non-government rail (NGR) model, joint ventures, customer-funded projects, and build-operate-transfer (BOT) and BOT-annuity models, the people said. The push comes as the Railways seeks private capital for projects that often lack an immediately identifiable standalone revenue stream, they added.
“The introduction of DPM and HAM indicates Indian Railways’ intent to broaden the range of public-private partnership structures available for attracting private capital,” said Bhavik Vora, partner and transport and logistics industry leader at Grant Thornton Bharat.
The move is part of the government's wider effort to unlock value from existing public infrastructure and mobilize investment, without relying entirely on budget support. Railways has been expanding its PPP portfolio across freight infrastructure, terminals and other assets, as it seeks to improve efficiency and generate additional revenue, said one of the people cited earlier.
Queries mailed to ministry of railways remained unanswered until press time.
HAM for bigger projects
The two models are unlikely to play equal roles. DPM, under which a private-sector entity acts as a co-developer with the government to finance, build or manage infrastructure, could be better suited to projects involving specialized facilities and commercial components.
Kuljit Singh, partner and national infrastructure leader at EY India, said the model had “limited applicability” and was better suited to relatively small projects providing last-mile connectivity to industries or ports.
“For large-scale PPP, railways will have to initially focus on HAM or annuity model,” Singh said, adding that BOT traffic-based models could be considered later once private investors had established a track record.
HAM could therefore become the principal vehicle for larger capacity-augmentation projects such as new trunk lines, doubling and tripling of routes and other railway infrastructure that does not have an immediately identifiable standalone revenue stream. Under the model, Railways shares construction financing and makes annuity payments linked to asset creation and performance, reducing traffic and revenue risk for developers, said Anurag Gupta, partner at Deloitte India.
“The next frontier—new trunk lines, doubling and tripling projects, maintenance depots—needed a different kind of instrument, since these assets don’t generate a standalone revenue stream for a private investor to underwrite,” Gupta said.
Under the highway HAM model, the government provides 40% of the construction cost upfront to the private concessionaire, while the balance 60% is mobilized by the developer who recovers the investment either through annuity payment by government agencies or toll collections.
For railways, the distinction between the models—HAM and DPM—will be crucial. Train operations, scheduling and network-level safety will remain with the national transporter, while private partners could take responsibility for construction, specialized operations and long-term maintenance depending on the contract, the two persons cited earlier said.
Bigger pipeline, bigger test
Railways already has experience with private participation. According to the railways ministry, 18 PPP projects worth about ₹16,686 crore have been completed by the national transporter, while seven projects worth ₹16,362 crore are under implementation. These include coal and port connectivity projects.
The new pipeline is broader, spanning station redevelopment, freight infrastructure and maintenance. It includes redevelopment of stations such as Vijayawada, Avadi, Tambaram, Andheri, Bengaluru, Kalyan, Chennai Central, Dadar, Coimbatore, Bhopal and Vadodara. Other opportunities include construction of 65 Garo Shakti cargo terminals and rolling out 50 private wagon rakes and 40 private container rakes, and locomotive and trainset maintenance depots and renewable and thermal power projects.
The scale-up nevertheless faces execution risks. The Parliamentary Standing Committee in a recent report has called for simpler approvals, balanced risk-sharing and a dedicated monitoring mechanism to address contractual, regulatory and implementation bottlenecks.
For Indian Railways, the new models are therefore less about simply raising capital than making projects bankable. The ₹2.62 trillion target will depend on whether approvals, land coordination and project execution can keep pace with the new financing architecture, Gupta noted.
The initial PPP experience provides a base, but the success of DPM and HAM will ultimately be judged by whether they can bring private investment into large-scale railway capacity creation without transferring excessive financial or operational risk to either side.