Rail connectivity projects proposed for pvt players

Rail connectivity projects proposed for pvt players

According to Railway Board Executive Director (Planning) N Madhusudan Rao these are being placed before apex trade bodies and prospective participants on Saturday to take it forward. The objective, he said, was aimed at creating additional rail transport capacity, increase rail share in freight traffic, and make rail option more competitive for prospective customers.

Stating that the proposal/s would require to have acceptable minimum Rate of Return of 14 per cent, he said, the four models are: cost sharing-freight rebate; full contribution-apportioned earning model; SPV model and private line model.

Under cost sharing model, the participating company/consortia will finance land acquisition which will be done by IR and own it. Besides financing 50 per cent of project cost upfront, the promoter/s will be permitted to recover this through freight rebate of 10 to 12 per cent on incremental outward traffic.. The IR will own, operate and maintain the line which will undertake construction following the MoU between IR and parties after other formalities.

Under full contribution model the participating company/consortia will bear 100 per cent of project cost, construct and maintain the line for 25 years and receive earnings minus O&M costs incurred by the IR which will own it. A license fee of 2 per cent for first ten years and 4 per cent thereafter till 25 years will be levied. At the end of tenure the entire revenue would accrue to railways and all costs borne by it.

Special purpose vehicle

The special purpose vehicle model envisages SPV being formed between the IR and the applicant wherein IR’s equity will own 26 per cent stake. The SPV route has proposed four revenue sharing models based on the connectivity of projects. The private line model envisages promoters constructing and maintaining the line for 30 year period after which IR will take over at zero cost. In all four models, Rao said, the IR will retain right to provide connectivity to other customers, regions and industries without affecting the agreement of the original promoters of the scheme.

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