Railways need to roll out innovative policies to attract private investment, say experts

Days after a government body pulled the railways for slow asset monetisation, a parliamentary standing committee has called for the Indian Railways to be more ambitious and set higher targets regarding private sector participation in railway infrastructure.  

For FY25, Indian Railways had reduced the target for public-private partnership (PPP) to Rs 10,000 crore from Rs 17,000 crore in FY24, almost 41% less than the last financial year. Against the target, the public behemoth achieved Rs 16625.36 crore in FY24 while it achieved Rs 8732.24 crore till December last year.

The Ministry of Railways formulated a Participative Policy, in 2012, to encourage the investment in developing rail connectivity by associating strategic partners and other investors. The policy defines five Public Private Partnership models, viz. Non-Government Railway (NGR), Joint Venture (JV), Customer Funded, Build Operate Transfer (BOT) and BOT-annuity models.

Experts say that the slow private investment is because the terms and conditions of the project are not economically lucrative enough to generate interest.

Lalit Chandra Trivedi, former Indian Railways General Manager, says that private players need to work on some innovative solutions to generate the interest of private players.

“Private players will do it for profit and the profit has to be assured to them. For a private player who is going for a bank loan, the government needs to factor in inflation. So, if they are told that whether they spend X or Y amount, they will get a fixed income, which is mutually agreed upon, and profits above a threshold will be shared with the government. The second concept is viability gap funding. So, all those things have to be there otherwise private players won’t invest,” says Trivedi.  

The Committee in its report tabled in parliament on Monday urged the ministry to look for private sector participation for Station redevelopment to reduce dependence on budgetary support and internal resources for the Station Redevelopment works.

A core group on asset monetisation has criticised the railways for its poor performance in monetising stations, passenger trains, and freight terminals. It has set a target of asset monetisation of 1.7 lakh crore for FY26. However, the railway has asked for reducing it.