A port-railway venture on fast track

Vinod Mathew

THIS IS the first such joint venture between the Indian Railways and a corporate house. It is to convert a 250-km metre gauge to broad gauge and is funded equally by both the entities. A model that is being considered for duplication in at least three locations in Orissa, Karnataka and Tamil Nadu, according to Railway officials.

Pipavav Railway Corporation Ltd (PRCL) the 50:50 JV between the Ministry of Railways and the Gujarat Pipavav Port Ltd (GPPL) is proceeding at a fast clip with the civil work. It has already placed orders for ballasts and concrete sleepers for the gauge conversion. The two partners will contribute Rs 100 crore each as equity. The rest of the Rs 320-crore project that is Rs 120 crore will be financed through debt.

It has been almost two years since the MoU was signed between the Railways and GPPL for jointly upgrading the 250-km metre gauge line between Surendranagar and Rajula. This MoU also envisages the extension of the converted rail line to Pipavav port, 19 km from Rajula. The project moved on from the MoU stage once the two parties entered into a Shareholders Agreement in March. The PRCL has given the O&M contract to the Western Railway.

Talking to Business Line, Mr Bhavesh Gandhi, Director, GPPL, said the finer details of the JV were settled in June when GPPL signed the Concession Agreement with the Railways. The direction of things to come became clear soon after, when the PRCL roped in Mr R. C. Dubey, former Director (Marketing), Concor (Container Corporation of India) as its CEO.

This is a win-win situation for the two partners. The Railways was losing money on this sector on fixed costs due to the inferior gauge. The Pipavav port, otherwise the most advantageous port destination logistically for the Northern hinterland, had to depend on road movement of its cargo. While the PSA Corporation, Singapore, the worlds largest port operator will ensure superior port operations at Pipavav, Maersk Sealand worlds largest container line will spell out the future direction of GPPL once the broad gauge connectivity is in place in the next 12 months, Mr Gandhi said.

With Maersk Sealand picking up 13 per cent equity in GPPL, following PSA Corporation which has a 20 per cent stake, it has become increasingly clear that GPPL would try and emerge a major player in container terminal operations. GPPL, which began full time operations in 1998, had till date been concentrating on bulk and liquid cargo.

To provide end-to-end solutions to its customers, PRCL plans to offer value-added services comprising both carriage of containers by rail and the container handling operations for the container cargo originating and terminating at the Pipavav port. Such services would include undertaking the full responsibility of managing the containers once they are discharged from the vessels. The package deal would provide for facilities such as transportation till end destination, by rail or road, transit and bonded warehousing.

Clearly, GPPL would also be looking at developing additional facilities along the 270-km line such as the railway stations and freight handling facilities besides the commercial exploitation of assets leased to it under the Concession Agreement. This is likely to include the advertising rights at all the railway stations en route. It appears as if the first 50:50 JV between the Railways and Corporate India has all the ingredients for a commercial success.