Indian Economy News

Railways raises PE to lay 295-km track in Chhattisgarh

New Delhi: Indian Railways has raised private equity in a special purpose vehicle (SPV), Chhattisgarh Katghora-Dongarhgarh Railway Limited, for laying railway tracks in a move set to change the funding landscape for the national carrier and pave the way for further such investments. Until now, railway tracks have been made and laid solely from public funding and owned by Indian Railways.

The first part-private funded railtrack will come up on a 295-km Katghora-Dongargarh corridor in Chhattisgarh at a cost of «¤??5,950 crore.

According to the plan, 25% of the project cost— around «¤??1,487 crore—would be shared among the four entities, with the Chhattisgarh government and Indian Railways buying in 24% equity each in the SPV and Maharashtra State Power Generation Company (Mahagenco) and ACB India Private Limited (a coal and power generation company) holding 26% equity each. The remaining 75%, «¤??4,463 crore, will be raised through debt from financial institutions.

The Katghora-Dongargarh railway corridor project is expected to be completed in four-and-a-half years and will connect Katghora with the Mumbai-Howrah trunk line. Work on the project is likely to start in December.

Apart from freight traffic, movement of two passenger trains per day in each direction is also envisaged.

Railway minister Suresh Prabhu initiated a joint venture programme between Indian Railways and states in 2016. Within two years of the programme, around 20 state governments have come on board with Indian Railways to invest in rail infrastructure. The Chhattisgarh rail corridor was cleared by the Cabinet on 26 September .

Before this programme, railway tracks could be charted and developed only by Indian Railways. With this scheme, for the first time state governments have been given the opportunity to chalk out railway infrastructure by providing some equity, either through funds or land.

“This is the first project of its kind and magnitude to be undertaken through the state joint venture route and also private equity. There are more partnerships on the anvil and it includes names such as Maruti, as well as various cement companies,” said a senior government official on condition of anonymity. The model is drawing attention in the market, he said.

Queries emailed to the corporate communication division of Maruti and the offices of Mahagenco and ACB India remained unanswered till press time.

While the government may deny that there are plans to privatize Indian Railways, it seems backdoor opportunities are being explored and implemented to skirt around any opposition or obstruction.

In 2017, Indian Railways, in a public-private partnership, leased out the operation and maintenance of Habibganj railway station to the Bansal Group, a Madhya Pradesh-based construction and real estate builder, for eight years as part of the station’s redevelopment plans. The Bansal group received four land parcels in and around the railway station complex on a 45-year lease to build a swanky commercial hub with shops, offices and hotels, in lieu of developing Habibganj station with modern amenities for Indian Railways.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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