India finishes PPP model for railway sector

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India finishes PPP model for railway sector

Suresh Prabhakar Prabhu, Railway Minister of India, and his team have finished a new public private partnership (PPP) model for the Indian railway sector.

The new model concession agreement for build - operate - transfer (BOT) projects guarantees the sponsors an 80% return of the projected revenue irrespective of the actual returns from the project. It also guarantees that project cash flows will go up by five to six per cent every year depending upon the inflation.

These clauses differ from the earlier agreements where the investor was not assured of any returns on his investment and had to bear the inflation factor too.

This new concession agreement aims to minimize sponsor risk in PPP projects, a move that is intended to reassure private investors and thereby increase investment for the Indian railway sector.

A total of four rail PPP projects have been identified to be carried out through this new model concession agreement. The projects are the following:

According to sources, it is expected that the 70-km Wardha - Nagpur line will be the first to be taken up.

Suresh Prabhakar Prabhuth has announced that Indian government has plans to invest about US$137 billion in the country's rail network over the next five years to increase India's track length from 114,000 km to 138,000 km by 2016. The Ministry of Railways has already approved US$16 billion investment for 77 projects covering a total length of  9,400 km of lines.

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