Private Train Operators to Pump in Rs 22,500 Crores, for 35-yr Concession Period

The NITI Aayog and Indian Railways (IR) have proposed a tentative framework for potential bidders looking to participate in the private train operation business.

The proposed list of routes on which private trains may be operated under this model can be found here.

NITI Aayog suggests that the project is likely to fetch a cumulative investment of Rs. 22,500 crores.

The framework outlines the following key points:

Up for Grabs

Over 100 routes, divided into several clusters or hubs from where operations can run. Each cluster is expected to require about 12 rakes.

What the Private Train Operator Gets

  • A possible Concession Period of 35 years, in line with the life of the rolling stock.
  • Right to collect fares and other charges from passengers as per the market’s capacity to pay.
  • Ability to decide rake composition. (3 AC, 2 AC, etc.)
  • Ability to provide value addition, differentiated customer service
  • Can procure train rakes from any source subject to compatibility and certification by relevant authorities.
  • Ability to decide if the rake should be a trainset or locomotive-hauled.
  • Access to Indian Railways track and infrastructure
  • Service Level guarantees from Indian Railways on certain metrics, with payments in case of failures to meet guarantees.

What the Private Train Operator Pays

  • Share of Gross Revenue from Operations
  • Haulage Charge, inclusive of various charges such as energy, terminal access, track maintenance, signalling costs, and other overheads, etc.)
  • Costs for Purchase of rake from Indian Railway Production Units or other manufacturers

What the Private Train Operator Will Need to Set Up / Manage at Own Cost

  • Maintenance Infrastructure, including plant and machinery for the maintenance of rakes.
  • Deployment of Running Staff, including loco pilots, guards, and other staff on the train. Indian Railways staff could potentially be seconded to Operator’s trains.
  • Deployment of Maintenance Staff and Service Staff
  • Compensation in case of claims of loss of life or goods, etc to be covered by insurance taken by the operator.

Bidding Process and Timelines

Operators for each cluster are expected to be chosen on the basis of a two-stage bidding process.

To ensure only serious bidders come forward, potential bidders (domestic or international) will need to meet several criteria in order to qualify.

This includes the potential bidder being able to prove payments of Rs. 2,700 crores over the past 5 years against work on one or several of specified categories of eligible projects. The bidder must also have a minimum net worth of Rs. 450 crores.

After discussions with various stakeholders, the ministry is likely to come out with a Request for Quote (RFQ) in January 2020, followed by invitation of actual bids in April 2020 from qualifying bidders.

The successful bidders, as per the proposed timeline, are likely to be announced by June-July 2020. Award of tenders are likely to be completed by August 2020.

Proposed Execution Deadline for Private Operator

Once awarded a cluster, the successful bidder has to start operations within three years of the Appointed Date. This includes the purchase of rolling stock and setting up of necessary facilities for maintenance, staffing, etc.

100 per cent operations on all finalized routes must begin in five years from Appointed date, according to the proposal.

While the structure proposed by NITI Aayog is fairly thorough, it is likely that several changes will be made over the course of discussions with potential bidders and other stakeholders from within the Indian Railways organisation.

It is also likely that the final list of routes under each cluster will also change, depending on availability of terminals like Parel or Panvel in Mumbai. Progress on both terminals is at its initial stages as of now.

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