The Hindu Business Line : Dedicated freight corridor — Rlys, SPV likely to share revenues

TO address the Indian Railways' major concern that the proposed dedicated freight corridor may take away the bulk of profitable freight business, leaving the Railways with its loss-making passenger services, the Railways and the Planning Commission are working out a revenue-sharing model between the two bodies.

Indian Railways' concern about its finances being impacted by the dedicated freight corridor arises because its losses in the passenger segment are covered by profits in the freight services segment at present. The proposed dedicated freight corridor is likely to serve the bulk freight segment better as it is being built with the aim of bringing down the unit cost of transportation. Thus, if most of the bulk traffic moves to the dedicated freight corridor, the Railways may be left only with its loss-making operations.

These fears are broadly being addressed by a two-fold mechanism — the organisational structure, wherein the Railways would continue to have a controlling stake in the freight corridor, and a revenue-sharing mechanism.

As for the organisational structure, the Ministry of Railways would have a controlling equity stake in the special purpose vehicle (SPV) that would own the dedicated freight corridor. Other equity-holders could include public sector units from the coal, power and steel sectors, which are the major customers of the Railways. "This would also ensure that these customers provide traffic to the dedicated rail freight system," explained a railway official. The responsibility for procurement and maintenance of rolling stock is likely to rest with the SPV for the freight corridor.

As for revenue share, the system would function through an earnings apportionment mechanism. The issues that need further deliberation include the process of determining access charges for each of the networks, and how to determine the change in access charges, among others, according to senior officials.

Both Indian Railways and the SPV handling the dedicated freight corridor will pay access charges to each other for the traffic carried on the each other's track.

"For example, if certain goods are transported from point A to point B and the entire distance includes 30 per cent of Indian Railways' tracks and 70 per cent of the dedicated freight corridor, then the revenues earned from that operation would have to be accordingly apportioned between the two organisations," explained officials.

The terminal handling charges, including loading and unloading, would also accrue to those organisations that own the stations.

Similarly, the method of determining access charges for each of the organisations is another issue. "What should be the cost of transportation based on which you decide the access charges for the different rail tracks? The costs would be different for Indian Railways tracks and for the track of the dedicated freight corridor," they added.

On the finance front, though the exact details are being worked out, various financing options are being considered, which include "loans from multilateral agencies and market borrowings". The construction of the corridor would cost between Rs 20,000 crore and Rs 30,000 crore. The Railway Budget this year is likely to have an indication of the funding pattern for the dedicated freight corridor. It may make some allocations for the initial earthwork for the tracks.

Meanwhile, on the technical side, while the Delhi-Mumbai leg of the corridor will be on diesel traction, the Delhi-Howrah leg is likely to be on electric traction. The corridor will have a 30-tonne axle load eventually. The Railways is likely to enter into technology transfer tie-ups with its counterparts in other countries for tracks, bridges, design of wagons, and signalling systems for the freight corridor.