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FDI-funded PPP model for Namma Railu?

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Commuter Rail
The government on Wednesday notified the liberalised foreign direct investment (FDI) norms for Indian Railways, permitting 100 per cent foreign direct investment through automatic route in several areas, including high speed trains.
 
However, proposals involving FDI beyond 49 per cent in sensitive areas, from security point of view, will be placed before the Cabinet Committee on Security (CCS) for approval by the Railway Ministry on a case-to-case basis, a statement to the press issued by the Department of Industrial Policy and Promotion (DIPP) said.
 
The other areas where FDI would be allowed include suburban corridor projects through Public Private Partnership (PPP), dedicated freight lines, rolling stock including train sets, locomotives/coaches manufacturing and maintenance facilities, railway electrification, signalling systems, freight terminals, passenger terminals and infrastructure in industrial parks like railway line/sidings.
 
- - - - For the funds starved and highly subsidised Indian Railways a liberalized FDI regime will help the sector’s modernisation and expansion and would also lead to completion of several projects that have been pending for want of funds. According to estimates, the sector is facing a cash crunch of around Rs 29,000 crore and FDI will help mop up resources.
 
For the full text of the report in the New Indian Express, click here.
 
Well, if Sri D V S Gowda, S W Railways, Railway ministry, DULT, and all those involved with "Namma Railu", have all been kind of vague in their responses to the umpteen queries raised by Sanjeev, Syed, and very many others, perhaps the answer lies in the fact that the Modi government has decided that as many of the future railway projects as possible should be worked under PPP, and, since financial implications can be huge, these besides would be better off FDI funded. And, now that it has been officially notified, perhaps, we can expect some movement soon. 
 
But, Namma Railu, as conceived originally by PRAJA (and endorsed by RITES in their feasibility report), was to run more or less on the lines of "Mumbai Commuter Trains", which would have limited the total project cost to Rs 8,000 cr, for a 405 km spread, and thereby the ticeketing to very affordable levels too. I wonder if that would be possible if taking the FDI-funded PPP route. Not just that, I expect the project scope may go even beyond, and allow for swankier look and feel, like of the Metro, and mall-like developments of the stations, through concepts like "value capture", etc.
 
Well, somewhere along the debates on Praja, members had referred to Mumbai Commuter Trains as cattle-class. But, that is because their upgradation became impossible with the Mumbaikars dis-allowing even the slightest of fare increases for decades together. The irony of it all however is that, even with its fare levels being almost 5 to 10 times the levels in Mumbai Commuter Trains, for comparable distances, the new Reliance operated Metro between Versova and Ghatkopar is operating to near full capacity. Besides, following its success, the MMRDA (Mumbai Metropolitan Regional Development Authority) has announced 2nd and 3rd lines too, with even greater route-lengths, and apparently there are enough and more private players to take them up. Once they all become fully operational, perhaps the resistance to appropriate fare fixing for the Commuter Trains too will weaken, and then they too could get upgraded to Metro levels, through the PPP route. 
 
All in all, the commuting experience is likely to become a lot more pleasant, and with improved frequency and speed, the commuting time would come down too. A fair bargain, one would think, even if the fare levels are going to go up, particularly if you appreciate the logic in the statement "Father used to walk 20 minutes to save Rs 20. Son spends Rs 20 to save 20 minutes", that I came across recently.
 
And, as for students, and those holding yellow ration cards (for people living below the poverty line), whatever subsidy the government may want to give on their monthly passes, may be directly credited into their Aadhaar linked bank accounts.
 
Is this where we are headed?
 
Muralidhar Rao

Comments

Sanjeev's picture

If PPP route, will Bangalore ever get Commuter Rail ???

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Already SWR / Indian Railway running any services on different segents with their whis and fancy,   type of population in Bangalore and suburbs looking even beyound 2025 with METRo inside city,   PPP ode may not be attractive for any player in Bangalore unless they are given 2000 Acers of land for real estate business siilar to NICE project.

Also its most unlikely that any Private person will like to venture into passenger segement in India considering many factors like sharing assets with Railway,  fare fixation, concession to Students, Senior Citizens, BPL card holders IZZAT Passes and monthly season tickets.

Unfortunate that Sadanand Gowda  / Modi finally  gave to pressure tactics of  Mubai people in a short span of  7 days when whole country was looking at them for streamlining the suburban rail fares.

As we can not compare Bangalore with Mumbai on use of  PT by citizens either Suburban Rail or METRO or  Buses or Walking

So Bangalore will keep struggling  to get its share of Suburban Rail thru Indian Railway  with small  services added every year.

In the end if PPP  can bring  Bangalore Commuter Rail,  I will be most happy person. and Bangalore people will be most benefitted.

  

amithpallavoor's picture

My views are the same as

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My views are the same as Sanjeev's. One more point, which needs to be noted here is that there are very few MNCs who have the capacity to manage the five feet six inches Indian Broad gauge. 

The only system in the West, which uses the Indian gauge is the San Francisco Bay Tranport system. 

Sanjeev's picture

FDI in Railways – what for?

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Article  gives thought  on where FDI can make changes to Railways :

https://www.railelectrica.com/indian-railways/fdi-in-railways-what-for/

amithpallavoor's picture

There is a fundamental error

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There is a fundamental error in the assuming that what could not work in NCR may not work in Bangalore as well.

It is like assuming that something like CRS shall benefit only the city of Bangalore. A few reasons as to why CRS shall prove to be a boon to Old Mysore region:

(1) The proposal to set up a smart city in Tumkur

(2) The emergence of Kolar as a hub for automobile manufacturing

(3) The KIAL Investment region in Devanhallli

(4) Rapid industrailization in Chikkaballapur

The reason why I feel the Delhi example can't be extrapolated to Bangalore is that these towns have hardly seen any sort of development in the last 60 years unlike a Meerut, Ghaziabad, Faridabad etc, which have become part of extended Delhi or NCR as we know. Prime real estate has been developed in these towns unlike a Chikkaballapur or Kolar. But I agree with the author on the count that instead of building a high speed rail network, we should focus on building a CRS network for NCR. 

There should be multiple origin points for these trains unlike Mumbai where most trains emerge from Churchgate or CST. Both are close to each other and that adds to the extreme congestion in the island city.

A lot of real estate players have been smacking their lips in anticipation that government shall provide the needed infrastructure so that we see a real estate boom in these towns. We need to learn from Delhi's examples and ensure that ecological disaster does not happen in the name of development.

A greedy politician who is wanting to make millions shall offer a stake in the suburban  rail SPV along with prime real estate in any of these towns. 

If Sai Baba is indeed reborn in Mandya then God save Old Mysore from an ecological disaster. 

Pun intended! I have been an agnost for most of my life and had no intention of bringing Godmen into this discusion but this so called prophesy suddenly came to my mind when I was writing this comment.

 

 

 

 

 

murali772's picture

Perils of govt continuing as a player

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Delhi Metro Rail Corporation (DMRC), which operates the nation's showcase metro system, is in danger of going the Indian Railways way - into the red.

DMRC seems to be coming under the same pressures as the railways: any increase in fares faces immense political opposition. Running its operations at fares fixed in 2009, the corporation is struggling to meet increasing cost. It has for years been pushing for a fare hike, which it says is essential for continued safe operations and maintenance.

- - - Government sources said E Sreedharan, the man behind the Delhi Metro, had tried his best to insulate the system from political interference and had even devised a formula for periodically increasing the fares.

For the full text of the report in The Economic Times, click here.

I had mentioned in my opening post that Mumbai commuter rail system "upgradation became impossible with the Mumbaikars dis-allowing even the slightest of fare increases for decades together". Going by the above report, Delhi Metro also appears headed the same way, due to interference caused by vote bank politics, which not even somebody of the stature of Mr Sreedharan is able to curb.

As compared to that, the Mumbai Metro (a PPP venture involving Reliance - operating between Versova and Ghatkopar) is ensuring that it does not land up with such problems, even in the face of every kind of game being played by the Mumbai government, of course with an eye on the vote bank (check here). Likewise is the case of the Tata and Reliance run PPP power supply operations in Delhi, which stood up to all kinds of populist political games of the AAP government, and now appear to have come the better off from it all (check here).

Well, can there be a stronger argument favouring a PPP, compared to totally government-run operations, than this? And, not just for Namma Railu, but every conceivable service. Very simply, it's time the government gradually eased itself out of the role of a player, and concentrated on its key role as the facilitator, regulator, and controller (where essential).

Muralidhar Rao
murali772's picture

when is Bengaluru getting its act together?

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The Centre has asked the state government to form a special purpose vehicle (SPV) for facilitating railway projects in the state. A memorandum of understanding (MoU) for he formation of the SPV with 50% stake each for the Centre and the state will be signed in New Delhi on January 8.

A letter in this regard reached the office of the chief secretary on Friday. The SPV will be in charge of future railway projects in the state. The Rapid Rail Transport Project (suburban rail project) proposed between Thiruvananthapuram and Chengannur will be a priority project.


For the full text of the report in the ToI, click here.

Well, the inevitability of such projects having to follow the PPP route has been evident from long. The only question that arises is what are the powers that be in Bengaluru waiting for, even as its citizens had been demanding such services from eons, and other cities like Thiruvananthapuram, Coimbatore, etc are now set to take the lead?

Muralidhar Rao
kbsyed61's picture

Karnataka Politicians lacks Political acumen and will!

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Murali Sir,

Unlike Karnataka, Kerala politicians deserve appreciation for their deep interest and efforts they take to get projects and works that benefits the state. Every year MPs from Kerala State submits their wishlist for Railways before the budget.

http://www.thehindu.com/news/national/kerala/mps-to-present-states-rail-wish-list/article6307816.ece

Have we heard of any such efforts from Karnataka state MPs? None. Just need to look into Loksabha or Rajya sabha records of how many question our MPs have asked in comparison to questions from Kerala MPs.

Moreover, even Bureaucrats from the state take interest and push projects that state is in need of.

 

 

 

 

murali772's picture

offer Commuter Rail System at Invest Karnataka 2016

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On one hand, proponents of commuter rail allege that DULT is not serious about pursuing the project and that the RITES report was hogwash meant to delay progress. On the other, Railway officials seem reluctant to shift focus to suburban trains due to their own constraints. “Where is the revenue in it?” asked a senior railways official.

“We have enough problems trying to stick to our schedules with intercity trains. Suburban trains will not give us the kind of revenue we need. Will we be allowed to charge ticket rates like Metro does? We have to face a dharna and a rail roko even with minor increases in ticket prices. Why should we run on lines that are bound to make losses for us?” the official said.


For the full text of the report (emphasis added by me) in the New Indian Express, click here.

More and more, it looks like Bengaluru's Commuter Rail System (Namma Railu) can happen only through the PPP route. Well, if that's so, why doesn't the Karnataka government find a partner for the project, which everyone is agreed needs to be an essential part of the city’s transport system (quite as mentioned in the same report), at the forthcoming "INVEST KARNATAKA 2016" event?

Muralidhar Rao
murali772's picture

more pointers to the way forward

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In an attempt to make states partner in development of rail infrastructure, the national transporter has signed MoUs with Kerala and Andhra Pradesh governments for formation of joint venture companies. The JV companies, which will have state governments holding 51% stake and the rest 49% with railways, would ensure faster implementation of rail projects.

- - - As there is always a demand for new rail lines from states and huge requirement of funds to execute the projects, JV firms will now be responsible for identifying projects, land acquisition and possible financing in addition to government funding and also monitoring.

After finances for a project are tied up, a project specific SPV (special purpose vehicle) would be formed to execute a project under the JV arrangement. The SPV can have other stakeholders from industries, PSUs, etc. However, the JV company will be a mandatory stake holder with minimum 26% shares in the SPV.


For the full text of the report in the ToI, click here.

Perhaps, clear pointers to the route for Namma Railu. So, then why shouldn't the state be taking the plunge, even as others are moving ahead. Invest Karnataka 2016 provides the right opportunity.

Muralidhar Rao
amithpallavoor's picture

http://www.business-stand...

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http://www.business-stand...

This seems to be a good model if we do want this project to be funded by private players?

 

 

 

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