Private sector can help increase funding options for rail infra

New Delhi: Private sector could help increase funding options for creating railway infrastructure, said ratings agency ICRA.

"Given the increased funding requirements, besides higher global business services (GBS), other avenues like Joint Ventures (JVs) with the state government, sourcing funds from multilateral financing institutions, and attracting private sector investment will be important," said Shubham Jain, Senior Vice-President and Group Head, Corporate Ratings, ICRA.

"Railways is also exploring various modes of public-private partnership, (PPP) including for creation of infrastructure, operations and maintenance, monetisation of operating assets, etc. If appropriate risk-reward balancing is done in these projects, private sector participation can help increase funding options."

According to the agency, a key infrastructure area where PPP can increase considerably is the redevelopment of railway stations.

It cited that there are more than 8,000 passenger railway stations with nearly all of these owned and operated by the Indian Railways.

Earlier, railways had explored the PPP route for redevelopment of some key stations in the past, however, only one project could be awarded on the PPP mode.

Subsequently, participation from private players for these projects was muted.

However, certain modifications were undertaken in the PPP model to make it more attractive for private sector participation.

Consequently, the agency expects that private player's interest in such projects would increase.

"Overall the investor relations (IR) is looking at various modes of PPP model for attracting private sector participation in various railway infrastructure projects. If adequate risk-reward balancing is achieved, the PPP in railways could achieve significant success and help IR improve the pace of infrastructure development," Jain added.

Notably, the Indian Railways is set for a major Capital expenditures (capex) programme and has formulated a long-term plan document called the National Rail Plan (NRP).

The NRP target is to increase railway's freight share to 45 per cent by way of developing or augmenting rail infrastructure capacity along with other strategies.

At present, Indian Railways has three key areas of capex -- track, terminal infrastructure and rolling stocks.

Overall investment of Rs 38.2 lakh crore is envisaged for the Indian Railways by 2051 under the NRP.

Nonetheless, it has three key funding sources -- Gross Budgetary Support, internal accruals from operations and extra-budgetary resources.

Lately, Railways have been looking to attract private investment towards infrastructure development.

In the past, it had formulated various modes of PPP models for rail connectivity projects, though it achieved some success.

But only about 3,000 km of track infrastructure with a project cost of Rs 41,695 crore has been created using PPPs.

Till now PPPs in rail infrastructure have been mostly in the port or mine connectivity projects.