The Hindu Business Line : Rail Vikas looks to adopt competitive bidding

New Delhi March 14 Rail Vikas Nigam Ltd (RVNL) is considering a move to adopt competitive bidding while choosing its partners for lucrative rail link projects. RVNL generally selects equity partners for its rail link projects, to be built on public-private partnership basis, based on the traffic guarantees the companies provide for the rail link to be built.

RVNL undertakes construction of bankable port links, new line and gauge conversion projects on a public-private partnership basis.

"We usually select stakeholders who are going to be directly benefited by the construction of a particular stretch of rail link and ask them to commit traffic volumes that they would move per annum (for a certain period)," said official sources.

Based on the committed traffic guarantees, which in turn mean earnings for that rail link, the stakeholders take up equity stakes in the companies. This traffic commitment is taken from equity investors to minimise the traffic risk associated with the project and thus ensure viable financial rate of return of the rail link.

PROPOSED METHOD

However, RVNL also has several rail link projects where there are no traffic risks as they are located near power plants, mines, etc and are thus assured of certain level of returns.

VARIOUS ROUTES

In these projects, several companies who are not direct users of the rail link would also be interested to invest. It is for such projects that RVNL proposes to select partners through competitive bidding.

Broadly, RVNL implements rail projects by forming project specific SPVs having equity and debt financing; build own transfer route, wherein the entire financing is arranged by the private developer through equity and debt route; private railway, wherein the project is funded as part of the port project and several projects are implemented either through the construction units of zonal Railways, or by awarding engineering procurement contract by RVNL and funds are raised by RVNL.

The projects being implemented or being planned for implementation through creation of project specific SPVs having equity participation by both strategic and financial investors include Haridaspur-Paradeep new line in Orissa; Bharuch-Samni-Dahej gauge conversion in Gujarat; Surat-Hazira new line in Gujarat; Obuvallirapalle-Krishnapatnam new line in Andhra Pradesh; Arsikeri Hassan-Mangalore gauge conversion in Karnataka; Gandhidham-Palanpur gauge conversion in Gujarat; and Angul-Sukinda new line in Orissa.