“Formation of Joint Venture Companies for Development of Railway Infrastructure in Kerala and Andhra Pradesh
Two Separate Memoranda of Understanding (MoU)
signed between Ministry of Railways and Governments of Kerala and Andhra
Pradesh for “Formation of Joint Venture Companies for Development of Railway
Infrastructure in these States
To Work In Collaboration With States For Developing Railway Infrastructure In The Country Is Our Priority : Suresh Prabhu
Relationship With States is Beyond a Project And Not A Transactional Relationship
To Work In Collaboration With States For Developing Railway Infrastructure In The Country Is Our Priority : Suresh Prabhu
Relationship With States is Beyond a Project And Not A Transactional Relationship
In the august presence of
Minister of Railways, Shri Suresh Prabhakar Prabhu two
separate Memoranda of Understandings (MoUs) between Ministry of
Railways and State Governments of Andhra Pradesh and Kerala for “Formation of Joint Venture Companies for
Development of Railway Infrastructure in the States of Kerala and Andhra
Pradesh” were
signed. On the event of Signing Ceremony, Railway Board’s officials
namely Member/Mechanical Shri Hement Kumar, Member/Staff Shri Pradeep Kumar,
Financial Commissioner Shri S. Mookerjee were also present among others. On
behalf of the Railway Ministry Shri Ved Prakash Dudeja, Executive
Director/Works signed the MoUs whereas on behalf of Government of Andhra
Pradesh Shri P. K. Srivastava OSD/Govt. of A.P. and Shri Sivasankar
M./Secretary, Transport Department, Govt. of Kerala signed the MoUs. The
MoUs were signed in the background of Railway Minister’s Budget announcement
regarding setting up of Joint Ventures with States for focused project
development, resource mobilization, land acquisition, project implementation
and monitoring of critical rail projects.
Speaking on the
occasion, Union Minister of Railways Shri Suresh Prabhakar Prabhu said that the
Indian Railways is happy to have a dream come true today i.e. of Cooperative
Federalism. He said that there are few activities which are directly
administered by the Central Government i.e. Defence, Foreign Policy and
currency etc. and Railways is one of those which directly administered by the
Central Government. He said that it is always necessary that we must have
partnership in other ground level sectors whether it is State Govt., Local Self
Govt, PSUs and others. Railway Minister thanked those 17 State Governments who
have consented for formation of Joint Venture Companies in collaboration with
the Ministry of Railways for development of rail infrastructure in their
respective States. Emphasizing the need of working together, Railway
Minister said that the relationship with the State Governments is beyond a
project and not a transactional relationship. Railways has introduced
decentralized decision making formula which is completely remarkable change.
The current moves will improve the initiative of the State Governments which
will help implementation of rail projects in a speedy manner.
Railway Minister said that
Railways is creating more companies and ultimately we are going to leverage the
funds. Railways has started revamping of 400 Railway Stations which is a
very massive activity and this will mobilize large resources for the Railways.
Massive investment effected in road transport sector while railway has not
invested so much despite this Railways have been the cheapest mode of
transportation. He said that Rail and Road will have to work together and
Indian Railways is also committed to develop a Multi-Modal Transport
Cooperation.
Shri Suresh Prabhu further
said that today’s MoUs are very important MoUs which will help in developing
infrastructure in the States of Andhra Pradesh and Kerala. Railway
Minister said that Railways have a large shelf of ongoing New Line, Gauge
Conversion and Doubling projects needing about Rs.3.5 lakh crores to complete
and thus Formation of Joint Venture Companies with these State Governments will
go a long way in faster commissioning of critical rail infrastructure projects
as it will not only help in mobilization of funds but also in facilitating
various clearances and land acquisition.
In his Welcome
Address, Member Staff, Railway Board Shri Pradeep Kumar stated that the Signing of Memoranda is going to be a stepping stone
for formation of JV companies. He stated that on earlier occasions also
Memoranda have been signed for formation of JV companies with Maharashtra and
Odisha. The MoUs envisages formation of a Joint Venture company
having 51% stakes of state Govt and 49% stakes of Ministry of Railways. Thus,
the JV company shall be fully owned by the Government. The company will
primarily identify projects and possible financing avenues in addition to Govt
of India and the state Govt. After finances for a project are tied up, a
project specific SPV or special purpose vehicle shall be formed. This SPV can
have other stake holders from Industries, Central PSUs, State PSUs etc.
However, the JV company shall be a mandatory stake holder with minimum 26%
shares in the SPV. The Ministry of Railways will sign a concession
agreement of 30 years with the project SPV for safe and sound operation,
revenue sharing and providing technical & marketing logistics to the SPV.
The revenue sharing shall be based on already established formula being used
for inter zonal apportionment of revenue.
Member Staff,
Railway Board also stated that the most important aspect of the MoU is that the
ownership of the land shall vest with the SPVs which is a departure from
previous practice. This will give financial leverage to the company to exploit
commercial potential of the land.
Vote of Thanks
was proposed by Shri Laj Kumar, Additional Member, Works, Railway Board.
Silent Features of the
MoU:-
· In view of the growing demands for railway lines in
various states and huge requirement of funds to execute them, Hon’ble Minister
for Railways announced in his budget speech regarding setting up of Joint
Ventures with states for focused project development, resource mobilization,
land acquisition, project implementation and monitoring of critical rail
projects.
· 17 State
Governments consented for formation of Joint Venture Companies in collaboration
with the Ministry of Railways for development of rail infrastructure in their
respective States. Draft MoUs were sent to these State Governments and
discussions were also held with them to clarify various provisions of the
MoU.
· MoUs have
already been signed by the Ministry of Railways with the State Governments of
Odisha and Maharashtra.
· Today,
MoUs are being signed with the State Governments of Kerala and Andhra Pradesh.
This signing of MOU is going to be a stepping stone for formation of JV
companies.
· The MoU envisages formation
of a Joint Venture companies having 51% stakes of the respective State
Govrnment and 49% stakes of Ministry of Railways. Thus, the JV companies shall
be fully owned by the Government. The companies will primarily identify
projects and possible financing avenues in addition to Govt of India and the
State Governments. After finances for a project are tied up, project
specific SPVs or special purpose vehicles shall be formed. These SPVs can have
other stake holders from Industries, Central PSUs, State PSUs etc. However, the
JV companies shall be mandatory stake holders with minimum 26% shares in
the SPVs.
· The ministry of Railways
will sign a concession agreement of 30 years with the project SPV for safe and
sound operation, revenue sharing and providing technical & marketing
logistics to the SPV. The revenue sharing shall be based on already established
formula being used for inter zonal apportionment of revenue.
· The most important aspect
of this MoU is that the ownership of the land shall vest with the SPVs which is
a departure from previous practice. This will give financial leverage to the
company to exploit commercial potential of the land. This is likely to result
in making project viable which are otherwise not viable.
· At the end of concession
period, the railways will have option to take over the assets at a nominal
price. This is largely in line with average codal life of the assets as most of
the assets will need large scale replacement after 30 years.
· Indian Railways has been
playing a major role in national integration by connecting the remotest places
and bringing people closer to each other. Railways receive a large number of
demands for network expansion as a railway line acts as an engine of growth for
the area it serves.
· However, Railways have a
large shelf of ongoing New Line, Gauge Conversion and Doubling projects needing
about Rs 3.5 lakh crores to complete. We have been trying to meet the
aspirations of public within limited availability of funds.
· To expedite the projects,
Railways have been trying to mobilize resources through other than Gross
Budgetary Support. However, on the initiative of Hon’ble Minister for Railways
Sh. Suresh Prabhu ji, Indian Railways have tied up funds for critical capacity
enhancement project of doubling, third line , electrification etc. An MoU was
signed with LIC of India and we have already taken first tranche of Rs 2000 Cr
for these projects. This tied up loan will ensure dedicated and assured funding
for such critical projects.
· Indian Railways have
targeted to commission 2000 Km New Lines, 4000 Km Gauge Conversion and 11000 Km
Doubling/Tripling/ Quadrupling projects over 5 years i.e. from 2015-16 to
2019-20. In 2015-16, we had kept quite ambitious target of commissioning 2500
Km Broad Gauge track. It is a matter of great satisfaction that we are poised to
not only achieve these targets but to surpass them. We have already
commissioned about 1300 Km Broad Gauge track till December, 2015 against 800 Km
track commissioned in the corresponding period of the previous year (Due to
monsoons, major commissioning takes place in the last quarter of the financial
year).
· Formation of Joint Venture
Companies with the State Governments will go a long way in faster commissioning
of critical rail infrastructure projects as it will not only help in
mobilization of funds but also in facilitating various clearances and land
acquisition.
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