Tag Archives: Ircon

Freeing up of IRCTC and IRCON is good news for Indian Railways.

Finance Minister Arun Jaitley slipped in two big steps concerning the Indian Railways during the Union Budget 2017 speech. He announced that the Indian Railway Catering and Tourism Corporation (IRCTC) and the Indian Railway Construction Company Limited (IRCON) will be listed on the bourses. Interestingly, IRCON International, as it is called, is already listed, but suffers from the typical public sector listing problem of not enough shares being disinvested making the stock illiquid.

IRCTC controls all the digital ticketing operations of Indian Railways, and post demonetisation has seen a 10 percentage point increase in the number of tickets booked online, from 58 percent to 68 percent, a substantial jump. It’s also a company that holds the world record for the maximum number of tickets booked online in a single day, at over 1.3 million.

IRCON is a 41 year-old company that has managed and executed large ticket infrastructure and railway projects across the world, from Afghanistan to Malaysia. It has annual revenues of $190 million.

Jaitley’s announcement to list both the companies in the bourses is not as much about the robustness of the two companies, as it’s about freeing the Indian railways to focus on its core task of providing high quality travel experience to passengers, achieve global standards of safety and refocus its financial resources towards capital expenditure and fleet expansion. The finance minister’s announcement has three potential transformative implications.

First, the autonomy given to the two companies to get into the market allows them to bring in much needed financial and non-financial resources in order to turn themselves into completely professional outfits that could bid for big ticketing and contracts with the best in India and going forward in the world. This is true especially for IRCTC, which has the potential to develop its tourism and catering operations on the back of the Special Purpose Vehicles (SPVs) for Tourism Zones announced by Jaitley in his budget speech. An efficient, innovative and energized IRCTC can take the battle to the airlines and their flash pricing and cheap tickets.

There are two reasons for such optimism. The first is the experience of China which decoupled several ancillary units associated with its railways system as part of a large scale reform two decades ago. The results are there for all to see, with the Chinese infrastructure, rake, signaling and engine companies successfully bidding for some of the biggest projects in the world. The second is closer home and is an Indian experience. The manner in which the ONGC Videsh Limited has done creditably around the world, on the back a freedom that comes from listing, acquiring key oil and natural gas assets for energy security is a model that can be followed by IRCON.Secopmn

Second, Union Railway Minister Suresh Prabhu has been quite clear about making the Indian Railways ‘asset light’. Decoupling ancillary units, or those operations that are not the core of the Indian Railways, is critically necessary for rebalancing the fiscal health of what is still India’s lifeline. An ‘asset light’ railways would be able to restructure its debt, approach multilateral institutions for loans at soft rates, bring in private participation and attract global majors to collaborate for some of the major freight and passenger projects. Again, China is a good place to look at, and much of the international cooperation that China was able to attract, right from the transfer of technology by Bombardier for the Chinese to locally manufacture bullet trains to Maglev, took place on the back of making the Chinese railways focused and lean and fiscally strong.

Third, this move will benefit the common man. It’s never a good practice for one holding company, in this case the Indian Railways, to occupy every part of the value chain. Such an occupation results in a near monopoly situation where the customer doesn’t have a choice, and consequently does not have a voice. The in-built system of checks and balances that comes from market-led diversity and leads to higher quality, customer satisfaction and better levels of safety is bound to come in as the Indian Railways starts disengaging itself from non-core activities.

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Posted by on February 10, 2017 in Uncategorized


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New-look Shalimar to take load off Howrah

Shalimar, in Howrah, is being turned into a major railway terminal by South Eastern Railway (SER). Located much closer to the Vidyasagar Setu than either Howrah or Santragachhi stations, this will be an ideal place from where trains towards central, southern or western India can originate. Shalimar is also on the banks of the Hooghly and this will facilitate transportation from Kolkata in ferries.

“Most SER trains now originate and terminate at Howrah station. Though the new terminus of Howrah station is meant exclusively for SER trains, there is capacity restriction. We require a new terminus for our trains, particularly the new ones that have been announced in the last few years. At present, Shalimar has very poor road connectivity. Apart from other passenger amenities, a double-lane connectivity to the nearby Andul Road has been planned for quick dispersal of passengers. There will also be connectivity to the jetty,” said Sanjoy Ghosh, CPRO, SER.

The new terminal will have a three-storied station building with facilities such as better roads, Road Over Bridges (ROBs), parking lots, bus stands, water treatment plant and an overhead reservoir. Most of the existing structures will be demolished to make way for the new ones.

“The project to develop Shalimar station was sanctioned in 2011-12. The original sanctioned cost was nearly Rs 204.85 crore and SER engaged IRCON to develop the station. IRCON developed a master plan and submitted a revised estimate of Rs 350 crore. The flyover connecting the station to Andul Road will be 1.5 km long. Three floors of the station will have covered area of over 4,500 sq m each. An ROB with bowstring design will replace a level crossing and there would be two subways connecting the platforms. There will also be a foot over-bridge connecting the platforms and a pedestrian subway to the jetty,” an official said.

The area surrounding the station will be fenced off and a circle road, circulating area and parking lots will be developed. The bus terminus would accommodate 15 buses and there will also be parking facilities for 50 auto-rickshaws. The parking lot will also accommodate 245 two-wheelers, 15 VIP cars and 160 private cars. There will also be space for 125 taxis.

“The work will be undertaken in two phases. Under the first phase, the station building will be constructed along with a foot over bridge, the circulating area, an additional platform and a pedestrian sub-way connecting the platforms. Basic infrastructural work has already started,” the official added.

Under the second phase, an island platform will be constructed and electrical work such as setting up of escalators, elevators and a sub-station would be completed.

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Posted by on November 22, 2015 in Uncategorized


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DMRC ready to fix imported rails for Kochi

The Delhi Metro Rail Corporation (DMRC) will start placing the rails on Kochi Metro’s viaduct, starting July 15. The Metro agency is awaiting sanction from the Research Design and Standards Organization (RDSO) of the Indian Railways to carry out the work.

“It’s mandatory to obtain sanction. The rails and design have to meet the specifications of RDSO. We have already approached railways. We expect to get it before July 15,” said DMRC project director Dani Thomas. Each 18m-long rail has to be lifted and placed on the viaduct. “These have to be welded together. But, we are not keen on doing such high precision work during heavy rains,” he added.

The Kochi Metro requires about 7,000 metric tonnes of head-hardened rails. According to Kochi Metro Rail Ltd (KMRL) about 3,500 tonnes of rails for the project has already been imported. The remaining consignment will reach by the end of the year

Imported head-hardened rails are more durable than those used by the Indian Railways. There are sharper curves on a Metro line compared with the regular railway system. The rails can withstand pressure exerted by Metro trains that will be running every five minutes. These rails are being imported from France.

IRCON has secured the contract for laying rails from Aluva to Pettah. The rails are now being transported from the Cochin Port to Kochi Metro’s yards. “The transportation is being done at night to avoid traffic congestion,” said a DMRC spokesperson.

However, DMRC would opt for regular rails used by the Indian Railways at Muttom yard as trains would be moving at a slow speed.

The Muttom yard is expected be ready by November. The yard will have a 1km-long test track, facilities for unloading coaches and a stability shed. “We had a tough time while carrying out land-levelling works. All those issues have been sorted out and, currently, work at Muttom is progressing quickly,” said Dani Thomas.

The third rail, which provides power to the train, has been imported from Germany. Kochi Metro uses the third rail traction system instead of overhead power lines. About 18,000m conductor rails have been imported.

“Around 200 bundles of third rail has arrived in Kochi. Each bundle contains six pieces. This is required for the 18km Metro stretch from Aluva to Maharaja’s College. Our technical experts will inspect the consignment and take delivery,” said a DMRC official.


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Posted by on June 2, 2015 in Uncategorized


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Prabhu for pruning freight rates over two years

Railway minister Suresh Prabhu expects to reduce the state-run behemoth’s freight rates sharply in the next couple of years to take on competition from the road sector and even undertake disinvestment in some of the ministry’s enterprises.

The minister said this would be possible as the railways is targeting a 50 per cent rise in revenue within a five year time frame, while he anticipates gross expenditure to rise by a far more modest rate of 15 per cent. “The spread can be used to either show an increase in profitability of railway operations or passed on as a cut in freight rates,” he told The Indian Express.

The minister said the revenues would rise riding the efficiency of the railway-owned enterprises. Those enterprises will shoulder the largest responsibility of adding to tracks and rolling stock of the railways from now.

Prabhu said that making companies like Ircon undertake additional capital expenditure also made sense as it would raise their valuations. The additional valuation allows for their disinvestment at attractive rates, he added. The disinvestment would provide additional revenue to railways.

This buffer can then be used to offer lower freight rates. Making capital expenditure only through the railway ministry’s own divisions did not offer any such advantage. With a larger capacity to run freight trains and more tracks to run them on, Prabhu said, he was sure he had a “game changer plan”.

“I would not need to service the entire additional money from the railway earnings only. I will get it from these companies, which adds to my capacity massively. So it becomes a game changer for the railways,” he said.

In the Railway Budget 2015-16 the minister has penciled an annual freight revenue target of 1.5 billion tonnes to be reached in five years, a 50 per cent increase from the current 1 billion tonnes per year. Most of the annual increase, the minister expects to earn by reducing the freight rates to lower than what truck operators demand. “It’s a doable plan,” he said.

Prabhu said this line of action has been overlooked by commentators who have instead claimed it would be difficult for him to finance the ambitious investment of Rs 8.56 lakh crore between now and 2019. They have pointed out that financing this level of investment would need about Rs 1,80,000 crore to be spent each year. But the Railway Budget has projected a plan outlay of only Rs 1,00,011 crore, a gap of nearly Rs 80,000 crore.

Within that, too, the railways has inked in Rs 17,655 crore as additional market borrowing. The interest cost on this borrowing will be a huge drag on railway revenue, they point out.

Prabhu said he is aware of the cost. He would consequently prefer to let the public sector companies share in the expansion plan. “So I don’t need budget for this from the department’s limited resource. Their borrowing on their balance sheet does not increase my liability,” he signs off.

Indian Express

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Posted by on April 17, 2015 in Uncategorized


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Bullet train project to cost Rs 1 lakh cr

India will have to spend approximately Rs 1 lakh crore for its first bullet train corridor between Mumbai and Ahmedabad, preparatory work for which has gained speed.

In its latest interim report submitted last week, Japan has factored in the cost escalation through the years that it will take to finish the project. The amount, around Rs 98,000 crore, could rise a bit more.

Based on estimates from the Japanese team working on the feasibility study for the proposed 550-km corridor, Railways has circulated a 21-page inter-ministerial concept note detailing the way it intends to go about  implementing the project.

From an earlier estimate of around Rs 62,000 crore, the concept note’s figures seem to have jumped to Rs 70,000 crore at 2014 prices. The interim report estimates 40,000 people will use the corridor daily by 2023. After the commissioning of the works, it will take around eight years for the first bullet train to hit the tracks.

The project estimate got a reality check after Finance Ministry, in its response to the concept note, highlighted that the estimate of Rs 70,000 crore did not factor in costescalation and tax to be paid to the government.

The Ministry has now asked Railways for a copy of Japan’s interim report to study it further. Railways, in turn, has asked the Japanese team to give detailed estimates based on multiple technological options available to see if using any particular technologywould lead to a significant variation in prices. The final report is expected in June.

The note says “discussions indicate” Japan International Cooperation Agency might agree to fund 85 per cent of the project in which construction and procurement costalone is around Rs 49,504 crore. Other major expenditure heads are Consulting ServiceCost (Rs 2,190 crore); land acquisition (Rs 10,248 crore); a contingency fund (Rs 3,334 crore) and the implementing agency’s management fee (Rs 4,700 crore).

The project may also bleed India’s coffers as its rate of return is projected to be only around 3-4 per cent. Railways considers a project economically viable if it has a rate of return of at least 14 per cent. But Railways said the bullet train’s “economic rate of return”—its contribution to the economy by the virtue of saving manhours and connecting two major cities—would be upwards of 11 per cent.

The concept note is a precursor to handing over the the job of the project’s implementation to Rail Vikas Nigam Limited (RVNL) and its subsidiary, High Speed RailCorporation (HSRC). Railways has argued that the job be given to RVNL as opposed to creating a new entity for this project.

The Cabinet will decide if the job can be given to RVNL on a nomination basis; a cabinet note will be moved after evaluating response from other ministries. RVNL would require a fresh mandate from the Cabinet since its original mandate was to take up “viable and bankable” projects along the Golden Quadrilateral.

A section of the ministry has also been in favour of assessing multiple available options before zeroing in on an agency. An earlier Rail budget had said a High Speed Rail Authority would be created for this. Another Rail PSU, IRCON had last year sent a letter to Railway Ministry seeking to be considered for the job. The HSRC’s formation did not have the vetting of the Railway Ministry’s Finance directorate, but sources said Railways has internally resolved that issue.

Indian Express

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Posted by on April 13, 2015 in Uncategorized


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High-speed railway tips from Tokyo professors at IIT-Kharagpu

The high-speed railway network proposed to run between Mumbai and Ahmedabad and Delhi and Chennai may turn into a reality soon. The Indian Railways have got a theoretical knowledge on the subject from a team of experts from the University of Tokyo at a 10-day workshop at IIT-Kharagpur.

“This course was conducted by professors who teach the technological aspect of building a high-speed railway network in Tokyo. The seminar was attended mainly by senior railway board officials, group general managers, RITES, IRCON and RDSO,” said Subhransu Roy, in charge of the Centre for Railway Research at IIT-Kgp. Among the experts was Tsung-Chung Kao, a research professor and director, High Speed Rail Systems at RAILTEC, University of Illinois, at Urbana Champaign, USA.

“We came to know about the types of trains available to run a high-speed secure railway system, the method of building the tracks and the viaducts. Since the experts did not represent any company, they discussed various kinds of trains that run in European countries, Japan, Korea and China. At the moment, even the US is thinking of building high-speed railway corridors. How the rail-wheel interaction takes place in case of high-speed railway movement was also demonstrated theoretically,” added Roy.

What emerged from the discussion was that specially-designed bridges have to be built to run high-speed trains. “Only a train with a speed of more than 250 km/hr is considered a high-speed train,” Roy said. The fundamentals of a high speed train are similar to that of a low-speed one that currently runs in India. But lighter trains have to be developed so that sound generation is minimized and acceleration maximized.

Besides, for high-speed railway, the tracks have to be absolutely flat. The quality of tracks will have to be of excellent quality, or the train will get derailed.

The railway corridor will have to be off the ground which will ensure no ‘settlement’. “Settlement means subsidence in the railway tracks due to movement of soil. It can only be restricted if the tracks are built on concrete pillars that will elevate the tracks. Railway officials were also told about the mode of power that will have to be used for running such trains,” Roy added.


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Posted by on January 4, 2015 in Uncategorized


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Dedicated Freight Corridor: Rs 20,000 cr orders soon

The Indian Government is all set to give Rs 20,000 crore worth of orders on behalf of the Dedicated Freight Corridor (DFC) which is to be commissioned by 2019. This is good news for L&T, GMR, and GVK and other construction companies. Indian Railways is setting up the project aimed to supplement the rail transport capacity with a project cost of over Rs 80,000 crore.

Here is an update on the issues which slowed down the mega project:

Land Acquisition: Like any other infrastructure projects, there are stretches of land that have been difficult to acquire for the government.For example, the western corridor of DFC was to pass through Panvel and then proceed towards Jawaharlal Nehru Port Trust (JNPT). But acquiring land for DFC has been difficult at Panvel where several other projects are also converging like proposed CST-Panvel fast corridor, upcoming airport at Navi Mumbai, suburban sections on the Virar- Vasai-Diva-Panvel line and finally, construction of the Panvel Coaching complex. The DFC authorities have now requested for additional land from CIDCO.

Management change: Frequent management changes and availability of adequate resources at the mid level have been a bane for DFC till date. “The company continues to suffer lack of institutional strength as a result of non-availability of adequate resources at the middle level. The post of all the directors and MDs constituting the functional board has been short of its strength since 2011 continuously and in absence of full strength of functional directors, various roles are already clubbed, which is affecting smooth functioning of the company,” confesses the annual report of DFC.

Not enough bidders: Given the conditions set by the Japanese government (which is giving soft loans) and which stipulates involvement of a Japanese partner, the total number of bidders has been low for the Western corridor. This has twin impact as cost will be higher and delays in award of orders, given final bids have only two players (in most recent cases). Of this, even if one backs out, then the entire bid process is put to jeopardy.

Cancelled tender: A tender for design and construction of civil, building and track work for a 102-km-long double railway line in JNPT-Vaitran section in Maharashtra was recently cancelled (Sojitz-L&T and Mitsui-IRCON were the qualified bidders) and fresh bids have been floated. The pre-qualification process for this package was originally initiated during November 2013 and was to be awarded in FY2015. Cancellation of a tender and iterating the process again have a ripple effect on the overall advancement of the project, says a Kotak analyst.

Slow orders: The DFC has recently awarded two big orders to GMR and L&T consortiums. The contract value at Rs 5,080 crore to GMR while L&T-Sojitz was awarded electrification works for the 915-km stretch. More than 40% of the ordering will be imported Japanese products – substation equipment, electric wires and other equipment for railway electrification. After a long lull, the government plans to give orders worth Rs 20,000 crore. This could be good news for the Indian companies as long as the orders are not delayed like earlier.

Business standard

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Posted by on December 13, 2014 in Uncategorized


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