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The Railway Ministry’s model concession agreement (MCA) for participative policies has been vetted by the Law Ministry, and is waiting the final nod of the Minister.
The move comes even as the Comptroller and Auditor General of India (CAG) has asked Indian Railways to frame a “model concession agreement” for executing its projects within the stipulated time frame, adopting uniform approach to all public-private-partnership (PPP) projects.
Expression of interest The CAG report, which was tabled in Parliament on Thursday, has based its recommendations by studying the first lot of PPP projects undertaken by Railways such as Pipavav Rail Corporation, Kutch Rail Company, Krishnapatnam Rail Company.
The CAG report also said that Indian Railways needs to start calling expression of interest for selection of all equity partners other than principal stakeholder, and secure minimum traffic guarantee from all stakeholders.
In practise, since 2007, the Railways has been inviting expression of interest from various stakeholders, sources explain that it is natural that only an immediate stakeholder – a port, or a mine, or a power utility – that wants a rail link will invest in the project.
Clause dropped Also, Railways dropped the clause regarding minimum traffic guarantee after the Finance Ministry pointed out that it was illegal from the company law perspective to ask one of the equity stakeholders to take on extra risk, explained sources.
The report says that the railways had to opt for PPP primarily due to shortage of funds. But, the Indian Railways (IR) did not adopt the model concession agreement prescribed by the Planning Commission for execution of PPP projects in infrastructure sector, and framed concession agreement on trial and error basis resulting in deficiencies in project management.
Interestingly, the report comes at a time when the Road Ministry – which has adopted a standard model concession agreement with Panning Commission’s involvement – wants flexibility to frame an agreement at its own level. This is because the agreement does not provide solutions to many issues.
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