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Business News/ Politics / Policy/  Railways eyes private funding to redevelop 15 stations
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Railways eyes private funding to redevelop 15 stations

Indian Railways is exploring a new public-private partnership (PPP) model to attract private investment to redevelop railway stations

Under the model, investors may get up to 40% of project cost as viability-gap funds and be allowed to use the space above platforms commercially.Premium
Under the model, investors may get up to 40% of project cost as viability-gap funds and be allowed to use the space above platforms commercially.

Indian Railways is exploring a new public-private partnership (PPP) model to attract private investment to redevelop railway stations, two people aware of the development said. Under this model, investors would receive up to 40% of the total project cost as viability-gap funding (VGF) and be allowed to use the space above platforms and tracks commercially.

The Rail Land Development Authority (RLDA), an Indian Railways unit, plans to run pilots at 15 stations, including Vijayawada and Anand Vihar, the people cited above said on condition of anonymity. Based on the experience, the model will be finetuned and implemented across other major stations, they added.

Under the hybrid PPP model, bids will be chosen based on the quantum of VGF support required by the private investor. The private developer will be allowed to develop air space (vertical space above platforms) to generate additional revenue through commercial activities, including the lease of office space, development of entertainment and recreational facilities, hospitality services, malls and even healthcare facilities.

Railway land around the stations would not be part of station redevelopment PPP, which is expected to be exploited by RLDA separately under a different monetization exercise involving the lease of land for commercial and residential development.

“The proposed new PPP model would eliminate the need to collect station development fees from railway passengers, a move that could make the exercise quite unpopular with commuters and burden the common man using railway service. The hybrid PPP model with VGF support and commercial development projects would adequately compensate investors and make it attractive for investors. The model is still being studied and will be available for use only during the next financial year," said an RLDA official, one of the two people cited above.

Once approved by the Railways, the new PPP model would be put up before the cabinet for approval.

Questions mailed to the spokesperson for the railway ministry remained unanswered till press time.

An official estimate in 2019-20 had pegged investment into railway infrastructure at 50 trillion between 2018 and 2030. Even finance minister Nirmala Sitharaman had, in Union budget 2019-20, proposed the use of PPP for faster development and completion of railway projects, including laying of tracks, rolling stock manufacturing, delivery of passenger freight services and other infrastructure development.

While railways’ capex has jumped over the past three to four years, with budgetary capex outlay for FY24 rising by about 50% to 2.4 trillion, huge spending needs require it to tap private sources.

Railways started considering the PPP model on station redevelopment a couple of years back, but the PPP model got deferred last year, and a decision was taken to award stations under engineering procurement and construction (EPC) mode, where cost is completely borne by the government and private sector’s participation is minimal and is limited to the provision of engineering expertise.

Tenders under the EPC route have already been issued for New Delhi, Mumbai CSMT and Ahmedabad stations, apart from a few others, involving a capex of over 10,000 crore. Also, the government has announced 1,275 stations for development under Amrit Bharat Scheme in this year’s budget. Almost all these stations are to be redeveloped under EPC.

“The private sector’s engagement in railway projects could also be brought into EPC contracts post the development of the infrastructure. Commercial development on redeveloped infrastructure by private sector partners could be considered later," the RLDA official said.

Railways has experimented with PPP projects in manufacturing locos, laying tracks and signalling; however, largely, the activity is restricted. A plan to run passenger trains in PPP mode has already been scrapped, and the transporter’s inability to function like the aviation and road sector through the levy of user charges prevents it from expanding the PPP coverage.

Railways accounts for 1.52 trillion or one-fourth of the Centre’s ambitious 6 trillion National Monetization (NMP) pipeline in four years through FY25. But so far it has almost drawn a blank, making negligible earnings through the exercise. Under NMP,the railways needed to monetize 120 stations, 30 trains and 1,400km of tracks, among others, in FY23 but has achieved little so far. The national transporter is now under pressure to step up its monetization drive, and in this, the option to open more areas for PPP projects has brightened.

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Published: 26 Feb 2023, 11:23 PM IST
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