Memorandum of Understanding (MoU) signed between Ministry of Railways and Governments of Telangana

Memorandum of Understanding (MoU) signed between Ministry of Railways and Governments of Telangana for “Formation of Joint Venture Companies for Development of Railway Infrastructure in Telangana State. 

In the august presence of Chairman, Railway Board Shri A.K. Mital an Memorandum of Understanding (MoU) between Ministry of Railways and State Government of Telangana for “Formation of Joint Venture Companies for Development of Railway Infrastructure in the State of Telangana” was signed today i.e. on 11.02.2016.   On the event of Signing Ceremony, Chairman Railway Board Shri A. K. Mital, Member Engineering Shri V. K. Gupta, Member Staff Shri Pradip Kumar, Secretary Railway Board Shri R. K. Verma and other Board Members and Senior Officials were present. On behalf of the Railway Ministry Shri Ved Prakash Dudeja, Executive Director/Works signed the MoU whereas on behalf of Government of Telangana, Shri Sunil Sharma, Principal Secretary, Department of Transport, Roads & Buildings, Govt. of Telangana signed the MoU. Dr. Shashank Goel, Resident Commissioner, Govt. of Telangana was present among others. The MoU was signed in the backdrop 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, Chairman Railway Board stated that Railways has a big shelf of projects valuing about 3.5 lakh crore. Last year, Railways had sanctioned additional lines of nine thousand kilometres. There have always been lot of expectations from various States for new railway lines/lands. Thus,  to meet the demands of the States, a Cabinet note was got approved for formation of JV Companies. He stated that 17 States have already consented for formation of JV Companies in their respective States and 5 States have already signed MoUs with Railway Ministry in this regard which are Andhra Pradesh, Kerala, Maharashtra, Chhattisgarh, Odisha. He stated that today’s MoU will help in putting the execution of railways projects on fast track.  He stated that this will also help to take into account the priorities of the States because these projects will be finalised in consultation with the States as there would be offices from State Governments as well as Railways in the new Company which will be formed.  He stated that this is very welcome step which takes the partnership of State and Centre together to take railway projects on very fast pace.

Salient Features of the MoU:-  

·         In view of the growing demands for railway lines in various states and huge requirement of funds to execute them, 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 MoU  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, Maharashtra, Andhra Pradesh, Kerala and Chhattisgarh.

·         Today, MoUs are being signed with the State Governments of Telangana. 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 Government 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 Minister for Railways Sh. Suresh Prabhu, 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.