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A year on, only nine states join railways to build rail networks

LiveMint logoLiveMint 05-07-2017 Jyotika Sood

New Delhi: Touted as its own contribution to this government’s focus on co-operative federalism, Indian Railways launched an initiative in 2016 where states would conceive their own rail projects, and develop them along with Indian Railways, sharing costs in the bargain.

A year later—the initiative was announced in the Railway Budget of 2016, the last separate rail budget—only nine states have signed joint venture agreements. And only four, Chhattisgarh, Odisha, Gujarat and Kerala, have actually formed companies with Indian Railways.

The railway ministry had previously said that 17 states were interested in forming such joint venture companies.

Government officials and experts attribute the lack of interest to several issues such as the lack of clarity over sharing of project costs and the reputation of Indian Railways for taking its time over projects. Many states are also worried that this is just an attempt by Indian Railways to share its financial burden.

The plan is for Indian Railways to form a joint venture with the interested state government that will develop the project. In each case, Indian Railways and the state were to put up equity of Rs100 crore each. The Union cabinet, while clearing the plan, capped Indian Railways’ equity commitment to Rs50 crore per state.

A senior railway ministry official said on condition of anonymity that the primary objection states have is that if “railways is the responsibility” of the Central government, why should they get involved? “Secondly, there is no clarity on investments,” this person added. For instance, he said, the states want “contributions such as land to be considered as investment.” As a result, most states are not too keen on the plan, he explained.

Railways is asking state governments to do all the homework such as identify projects, and prepare the project report and audit it, but the whole thing has to be finally approved by the Union Cabinet, said a state government official. What if Cabinet doesn’t approve it, this person asked, speaking on condition of anonymity.

Himachal Pradesh’s additional chief secretary (planning) Shrikant Baldi said it doesn’t make sense for the states to get involved and that one “can’t keep forming joint ventures for every project”. Indian Railways has the manpower and the financial strength to “continue with its mandate” he added.

Himachal Pradesh is one of the states which has refused to be a part of the initiative.

Still, the plan has legs, said an expert and a rail ministry official.

According to Rajesh Agarwal, executive director (joint venture), ministry of railways, the plan is “innovative” and allows “state governments plan rail infrastructure as per their requirements.”

For instance, states could “ask for new lines for their industrial regions,” pointed out Jaijit Bhattacharya, infrastructure and government services partner at KPMG. Even private companies would be willing to be part of such efforts he added. “The arrangement will also help in privatization of railways.”

“The concept has huge potential and it’s up to the states how they take advantage of it,” said Agarwal.

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