Indian Railways is preparing to seek Cabinet approval to let foreign governments and public sector undertakings redevelop its stations in a fresh thrust to the flagship railway infrastructure project of the NDA government.
After a year of lull, during which Prime Minister Narendra Modi himself as well as the Prime Minister’s Office (PMO) have multiple times nudged the Railways to speed up the redevelopment of 400 stations in the country, Rail Bhawan has finally picked up the pace to sort things out after the Habibganj project in Bhopal was awarded to Bansal Pathways recently.
The work is now centered around tying up with various players in different models of engagements for redeveloping all the 400 stations. This is because it is being thought that Indian Railway Station Development Corporation (IRSDC), which anchored the Habibganj station bidding process, may not have the wherewithal to do so for all the 400 stations.
So on the table now are models like award of work to foreign governments, special purpose vehicles with states, direct tie-ups with PSUs, “modified Swiss challenge” for its own zonal railways and more in Railway Minister Suresh Prabhu’s quest for partners in the mammoth exercise.
By August 15, Railways will appoint a strategic adviser, a consultancy firm, to carry out studies on feasibility and financial viability of all the stations up for redevelopment to give Railways a real idea about where each station stands as far as market value and commercial scope is concerned vis-à-vis the grand scheme of redevelopment. This will be the first such exercise in Indian Railways. Technical bids to select the firm was opened on Friday. In the fray are global consulting firms of repute.
The various models
Railways is already in talks with governments of Belgium, South Korea, France, Spain, the UK and China to offer either a station each or a cluster of stations as part of redevelopment through government-to-government contract.
Similarly, PSUs, either its own or others will be roped in, to take up a few stations too.
For instance, in cases of stations where commercial players may not be too interested to invest—typically signifying a rate of return of less than 10 per cent — PSUs and foreign governments might be better placed to participate.
Railways is also in the process of creating special purpose vehicles in joint ventures with governments of Chhattisgarh and Maharashtra specifically for station development.
Modified Swiss challenge
Lastly, the zonal railways will get to redevelop some stations on their own by following the “modified Swiss challenge” methodology. In that, zones will approach the markets soliciting plans and financial models for developing a station. From the proposals it receives, it will select the best one. Then it will disclose that proposal to the open market again inviting anyone to better it. If no one betters it, the developer with the proposal gets the contract. If someone matches it, then the developer gets the first right to refuse. And if the market throws up a better offer, Railways is free to accept it. In the interest of transparency, each zonal railway will form a panel of experts to evaluate the proposal.
In the pipeline are more ideas like borrowing from the World Bank to develop stations on its own, without involving private developers. But that might come at a later stage, sources said.
“The strategic adviser will be engaged for an overall roadmap and execution of the whole plan. As it is, the next six-eight months timeline is set. After Habibganj, contracts for Surat and Gandhinagar will be awarded by this time. Since each station and each state is unique, we require a professional agency to tell us how best to go about adopting the various models for the 400 stations,” said a senior Railway ministry official.
The Habibganj deal
By November 2019, the first redeveloped station of Hahibganj will be ready. The developer Bansal Pathways will carry out financial closure by November this year. That means it will demonstrate to railways that it has tied up assured funding of Rs 450 crore for the project. Then the foundation stone will be laid signifying start of work. It will take three years to upgrade the station and five more years to build the entire commercial development of land and airspace.
In the Habibganj deal, Bansal has to give Railways a redeveloped station as per the transporter’s specifications for Rs 100 crore. After that, it can do commercial development worth Rs 350 crore. In the revenue sharing arrangement, Bansal gets to keep everything except proceeds from ticket sales. It gets advertising rights as well. Bansal will keep the commercial property for 45 years after which Railways will get back its ownership. The total commercial development of land and airspace to be undertaken would be around 11 lakh square feet.
But IRSDC is in the process of concluding preliminary work for stations like Surat and Gandhinagar. It has other stations like Delhi’s Bijwasan and Anand Vihar, Chandigarh, Shivajinagar (Pune), and SAS Nagar (Mohali). By next financial year, IRSDC will have some more stations in its kitty.