PM-headed CoI moots SPV for rail freight corridors

New Delhi, July 2: The Task Force on the Delhi-Mumbai and Delhi-Howrah rail freight corridors, set up at the instance of the Prime Minister-headed Committee on Infrastructure (CoI), has recommended the setting up of a Special Purpose Vehicle (SPV) that would construct, operate and maintain the corridors on commercial principles and relying on efficient technology solutions.

The proposed corporate entity would provide the rail infrastructure but would not itself engage in freight business, thus providing non-discriminatory track access on payment of haulage charges by train operators.

''This approach would herald large-scale private investment and competition in freight operations. This underlying separation of rail from wheels would also mark a paradigm shift in the functioning of the Railways which has already introduced private participation and competition in the movement of container trains,'' says the report.

The Task Force, chaired by Planning Commission member Anwarul Hoda, included experts and representatives from the Commission, the Railway Board and the Finance Ministry.

The estimated cost of Western and Eastern Corridors is Rs. 11,446 crore and Rs 9695 crore respectively. As per the current estimate, work on both the corridors will be completed in about five years after the start of construction of the project.

Dedicated freight corridors -- tracks exclusively meant for super fast freight trains cruising at a speed of 90-100 km per hour as opposed to the 25 kmph at present -- will facilitate plying of higher axle load wagon and double stack containers.

Railway Board Chairman J P Batra said the government had received the report on the SPV and a final decision would be taken by the Cabinet by the year-end.

''In the first phase, the decision would be taken on the composition of the SPV and later on its funding pattern,'' he said, adding: ''Hopefully, the SPV would become functional fron the beginning of the next year.''

The report says the mechanism of SPV, owned jointly by the Railways and users of bulk freight services, such as port operators and shipping, oil, iron ore and steel companies, largely in the public sector, should be entrusted with the task of planning, construction and maintenance of infrastructure. Some of the stake-holders identified for the purpose are Ports Trust, CCL, SAIL, and NTPC.

The coming together of the Railways and bulk users of freight services would ensure an adequate equity basis, which could be leveraged for market borrowings for investment in the freight corridor.

In order to help ensure the requisite volume of financing as well as to provide adequate representation of other stakehoders' interests, the SPV board should have a nominee each from the Finance Ministry and the Planning Commission. However, the Railways Ministry expressed reservations.

It also suggested that the SPV should not be fully owned by the Railways, and a more diversified ownership with other stakehoders, mainly from the public sector, as investors in equity would be in the best interest of the efficient management of the freight corridor.

Recommending that the Railway Ministry should be the administrative machinery for the SPV, the report said it must have effective independence in decision-making and be able to function with a market focus and business orientation.

The report pointed out that the high-density Delhi-Howrah (Eastern Corridor) and Delhi-Mumbai (Western Corridor) are already saturated in terms of line capacity utilisation and accelerated growth of the economy is only adding to the congestion on these routes.

''A quantum jump in capacity is, therefore, necessary for meeting the rising freight demand on account of robust domestic growth as well as the rapid increase in international trade,'' says the report.

It said that on the Mumbai-Delhi segment, trucks moving on the National Highways would offer enough competition to the dedicated freight corridor. After the broadening of the highways into six-lane, the competition would intensify.

''The dedicated freight corridor could still manage to retain and even increase its share of the freight business if it can offer the reliability that the manufacturing industry would want in particular.

According to a 1997 nationwide survey of users of rail freight services, the Railways was rated below roadways on all parameters, such as reliability, availability, suitability, price, time, connectivity, damages, information sharing, adaptability, cost-friendliness, negotiability, access to officials, ease of payment and claim time.

These aspects can be addressed more efficiently in an independent organisation operating services in the dedicated freight corridors than in a very large organisation like the Railways.

Railway Ministry sources said work on the detailed Preliminary Engineering-cum-Traffic Survey and Final Location Survey for the project had started.

UNI