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Mamuni Das

New Delhi, Sept. 15 The Indian Railway Catering and Tourism Corporation (IRCTC) may end up paying a heavy price for getting to execute the budget hotels project.

While initially the public enterprise was supposed to pass on 40 per cent of earnings from such projects to the Railways, it may now have to shell out 85-per cent revenue or more.

IRCTC had invited bids on revenue share basis from private firms to set up hotels on the Railways’ land on a BOT (build, operate, transfer) basis at 20 locations in 2006. Successful bidders were to shell out Rs 754.09 crore (net present value discounted at ten per cent) over 30 years.

However, since Rail Land Development Authority (RLDA) was set up through an act of Parliament, a turf war has started with the Railways’ land directorate pointing out that only RLDA is mandated for commercial activities to be undertaken on the Railways’ vacant land.

The Indian Railways had mandated IRCTC to set up budget hotels on Railway land in 1999, when RLDA had not been set up.

IRCTC, which issued the LoAs to three consortia for 20 locations — Zoom-Royal Orchid, GL Hotels and Pan-India Paryatan, and Signet Hotels — has not been able to hand over land till date. A final decision on the issue is still pending at the Railway Board level.

IRCTC will be under pressure to share higher levels of revenue with the Indian Railways, particularly since RLDA will be passing on the entire earnings of commercial land development to the Railways.

One of the options being considered by the Railway Board is to allow IRCTC to go ahead with the project on 15 sites (excluding Chandigarh, Pune, Agra, Secunderabad and Mumbai where world-class stations are to be developed), provided it passes on 85 per cent revenue to it.

Another option is to allow RLDA to re-invite tenders for all the sites after rectifying certain clauses in contracts, which were pointed out by the land directorate, and allowing IRCTC to operate the hotels.

For instance, the land directorate is against the contract condition of handing over the ownership rights of the assets for the 30-year period since it might become difficult to vacate the premises. “Instead bidders should get leasehold rights only,” say sources.

More Stories on : Railways | Hotels | Tourism

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