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Indian Railways eyes over $4 bn fund for private passenger trains

Recently, the Modi government has announced two major initiatives of seeking private investment, one is the running of passenger trains by private operators on the Indian Railways network and the other is the redevelopment of railway stations across the country. According to Indian Railways, these projects have the potential of bringing an investment of over $7.5 billion in the next five years. The national transporter has stated that it is eyeing over $4 billion investments with private passenger train services. Recently, Piyush Goyal chaired Railway Ministry has invited both domestic as well as global investors to actively participate in the bidding process for these initiatives.

The private investor will be responsible for finance, design, procurement, maintenance, operation of trains along with the setup or upgradation of the depot for train maintenance. Also, the investor will be responsible for the punctuality, reliability and upkeep of trains. Giving a boost to ‘Make in India’, the investor will be sourcing via domestic production in a phased manner (only three trains can be imported). On the other hand, Indian Railways will be providing access to track and other fixed infrastructure, right of way, access to depot site as well as access to washing lines. The national transporter will also provide priority at par with Indian Railways’ premium trains. To operate the trains, the loco pilot and guards will be provided by Indian Railways as well.

Indian Railways has identified 12 independent clusters with 109 origin-destination routes. On these routes, as many as 151 passenger trains are expected to be operated by private players. According to the national transporter, some of the reasons to invest in this project are proven unmet demand, long term concession, established infrastructure, operational freedom. During the year 2019-19, the total originating non-suburban passengers was 3.65 billion and the number of waitlisted passengers was 88.5 million.

The rights of private investors will include pricing, service, and operational flexibility. Also, the investor will have the right to choose halts, freedom to procure rolling stock. The obligations and payments of the investors include fixed haulage charges, indexed annually; energy charges as per actuals and % share in gross revenue.

It will be a two-stage bidding process. The first stage involves RFQ for pre-qualification based on financial capacity (50% of the estimated cost of the project) and the second stage involves RFP- financial bidding.

Speaking about the importance of the project, Amitabh Kant, CEO, Niti Aayog said, “This is a paradigm shift in what Indian Railways has been doing…this will rewrite the growth story of India. Private entities will source and operate trains using the Indian Railways infrastructure. This is a win-win situation for the private sector and Indian Railways. This entails an investment of around Rs 30,000 crore of $4.3 Billion. The aim is to cater to the unmet demand”.


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