India to adopt PPP route to develop railway projects

The two new locomotive factories in Bihar, which were finalised by the Government of India last year and approved by the Union Cabinet last month, would be developed on public-private partnership basis, the Ministry of Railways has said. The project is a part of the government’s strategy to use PPP mode as an “important tool for mobilising resources in the development of railway infrastructure projects” in India.

The government has planned to establish an electric locomotive factory at Madhepura in Madhepura district and a diesel locomotive factory at Marhowrah in Saran district, both in Bihar. The two projects are estimated to cost Rs.1,294 crore and Rs.2,053 crore, respectively, with limited equity contribution by the Ministry of Railways.

Following the commissioning of the projects, over a 10-year period, the factories will provide Indian Railways with 800 electric locomotives of 12,000 hp each and a mix of 1,000 diesel locomotives of 4,500 hp & 6,000 hp with high-level performance guarantees similar to international practices. The locomotives manufactured at both these factories will be fuel efficient and help mitigate the adverse impact of greenhouse gases.

“The successful execution of these projects by the joint venture route will usher Indian Railways into a new era of reforms,” the Ministry of Railways noted.

The government is hopeful that the new locomotive factories will attract significant foreign and domestic investment in these and other railway projects. In the case of the two locomotive factories in Bihar, the private JV partners will be selected through a two-stage international competitive bidding process. In fact, the RfQ bids have already been invited and their evaluation is underway. The bids will be finalised within six months of the Cabinet approval.

During the ongoing 12th Five-Year Plan, the Ministry of Railways has given in-principle approval for various PPP projects in the railway sector (see table). These include rail connectivity to the ports of Jaigarh and Rewas (Maharashtra), Ashtaranga and Dhamra (Odisha), and Hazira (Gujarat); redevelopment of railway stations, logistics parks, and private freight terminals; Mumbai-Ahmedabad high-speed corridor; elevated rail corridor between Churchgate and Virar in Mumbai; Sonenagar-Dankuni dedicated freight corridor; loco and coach manufacturing units; and energy conservation among other projects.

The proposals for the two locomotive factories in Bihar were finalised by an informal Group of Ministers chaired by the Minister of Finance and comprising the Minister of Railways and Deputy Chairman of the Planning Commission. This inter-ministerial group was formed under the direction of Prime Minister Manmohan Singh in order to fast-track infrastructure projects in the railway sector and come up with a creative financing-cum-implementation mechanism for the projects.

Meanwhile, towards the end of last year, the Ministry of Railways laid the foundation stones for two factories—a mainline electrical multiple unit (MEMU) coach factory near Rupaheli Station in Bhilwara district of Rajasthan and a forged wheel plant at Raebareli in Uttar Pradesh. The MEMU coach factory, which was approved in Railway Budget 2013-14, will be developed at an estimated cost of Rs.800 crore. It is a joint project of Indian Railways, Government of Rajasthan and Bharat Heavy Electricals Ltd. The forged wheel plant will be jointly developed by Indian Railways and Rashtriya Ispat Nigam Ltd, a PSU under the Ministry of Steel.