The Indian Railways is among the world’s largest rail networks. The Indian Railways network is spread over 115,000 km, with 12,617 passenger trains and 7,421 freight trains each day from 7,172 stations plying 23 million travellers and 3 million tonnes (MT) of freight daily. India’s railway network is recognised as one of the largest railway systems in the world under single management.
The railway network is also ideal for long-distance travel and movement of bulk commodities, apart from being an energy efficient and economic mode of conveyance and transport.
The Government of India has focused on investing on railway infrastructure by making investor-friendly policies. It has moved quickly to enable Foreign Direct Investment (FDI) in railways to improve infrastructure for freight and high-speed trains. At present, several domestic and foreign companies are also looking to invest in Indian rail projects.
- India has the fourth largest rail freight carrier in the world and has the largest passenger carrier.
- 1.3 million strong work force in Indian Railways.
- Indian Railways network spans more than 66030 kms. making it the world’s third largest rail network.
- Indian railways carried around 8224.12 million passengers in 2014-15 which is about 1.430 million higher than the passengers of the world put together.
During FY 2016-17, the passenger traffic of Indian Railways grew 0.8 per cent to 8,219.38 million, with passenger revenue growth of 4.6 per cent at Rs 47,449.75 crore (US$ 7.37 billion). The overall revenue of Indian Railways grew 8.7 per cent year-on-year to Rs 15,884.58 crore (US$ 2.47 billion) during March 2017. The passenger earnings grew 10.1 per cent to Rs 4,205.29 crore (US$ 652.90 million) and the freight earnings grew 4.1 per cent to Rs 10,273.20 crore (US$ 1.60 billion) during March 2017.
The revenue generated by the Railways is expected to grow at 10 per cent in the fiscal year 2017-18. The Union Budget 2017-18 has estimated that the overall earnings will rise to Rs 189,498.37 crore (US$ 28.42 billion) in 2017-18, compared to Rs 172,305 crore (US$ 25.84 billion) in the fiscal year 2016-17.
Foreign Direct Investment (FDI) inflows into Railways related components from April 2000 to June 2017 were US$ 812.21 million.
Following are some of the major investments and developments in India’s railways sector:
- With eight metro rail networks spread over a length of 370 kilometres (km) and over two dozen metro projects lined up, India’s metro rail network is expanding at a fast pace. The Government of India has allocated Rs 17,960 crore (US$ 2.79 billion) for metro rail companies in FY 2017-18.
- An Electronic Interlocking and Yard Remodelling has been commissioned at Dadri Railway Station in Uttar Pradesh in a record time of only 150 minutes, which is expected to improve mobility in train operations on the Delhi Howrah section of Indian Railway network.
- Union Ministry of Railways plan to cover the length and breadth of Arunachal Pradesh by rail network requiring an initial investment of around Rs 50,000–70,000 crore (US$ 7.76-10.87 billion) at an elevation range of 500 to 9,000 feet.
- A Universal Rail Mill worth Rs 1,200 crore (US$ 180 million) was inaugurated at Steel Authority of India’s (SAIL’s) Bhilai Steel Plant by Mr Birender Singh, Union Minister of Steel, which will produce world’s longest single rail of 130 meters.
- The Indian Railways plans to set up a US$ 5 billion Railways of India Development Fund (RIDF) for investments of it projects.
- The Indian Railways is looking to award six tenders worth Rs 8,000 crores (US$ 1.2 billion), for setting up a country-wide electricity transmission network, as part of a strategy to reduce electricity bills.
- Mr Nitin Gadkari, Minister for Road Transport and Highways and Shipping, has stated that India will likely collaborate with Germany for projects worth Rs 1 trillion (US$ 15 billion), aimed at enhancing railway connectivity of Indian ports and identifying environment-friendly technology for scrapping of old vehicles.
- • Mr Suresh Prabhu, Railway Minister of India, has unveiled Mission 41k initiative, aimed at saving Rs 41,000 crore (US$ 6.15 billion) on the Indian Railways’ expenditure on energy consumption over the next 10 years by doubling the annual rate of electrification from 2,000 km to 4,000 km in the next two years.
REASONS TO INVEST
- 100% Foreign Direct Investment (FDI) in the railway infrastructure segment has been allowed recently which has opened up opportunities for participation in infrastructure projects such as high-speed railways, railway lines to and from coal mines and ports, projects relating to electrification, high-speed tracks and suburban corridors.
- Indian Railways envisages a prospective investment of USD 130.76 billion in the next five years.
- The sector aims to boost passenger amenities by involving Public Private Partnership (PPP) investments in provision of foot-over bridges, escalators and lifts at all major stations.
- Last-mile connectivity to boost business activity in and around ports and mines has been proposed through the formation of special purpose vehicle (SPV) companies under the PPP model.
- Indian Railways aims to involve private equity through individuals, NGOs, trusts, charitable institutions, corporates, etc. to provide passenger amenities such as battery-operated carts to facilitate movement for senior citizens and differently abled, at stations.
- To strengthen rail connectivity with various ports, Indian Railways has floated SPVs under the PPP mode. Pipavav Rail Corporation Ltd., Bharuch-Dahej Railway Company Ltd., Kutch Railway Company Ltd., Hassan-Mangalore Rail Development Company, Obullavaripalle-Krishnapatnam Railway Company Ltd., and Anugul-Sukinda Railway Company Ltd. have been established.
- Three rail connectivity projects namely Gevra Road-Pendra Road new line, Raigarh-Bhupdeopur new line and Jaigarh Port connectivity projects are being implemented through the joint venture route.
- Eastern Dedicated Freight Corridor of 1840 km length and Western Dedicated Freight Corridor of 1504 km length is under construction as well as many projects are under planning stage.
- Wifi provided in 100 stations, to be provided in 400 stations more.
- Components manufacturing
- Infrastructure projects
- High speed train projects
- Railway lines to and from coal mines and ports
- Projects relating to electrification, high-speed tracks and suburban corridors
- Dedicated freight corridors
- The re-development of railway stations
- Power generation and energy-saving projects
- Freight terminals operations
- Setting up of wagon, coaches and locomotive units
- Gauge conversion
- Network expansion
- The Government will provide Rs 55,000 crore (US$ 8.25 billion) towards capital and development expenditure of Railways
- A fund named Rashtriya Rail Sanraksha Kosh worth Rs 100,000 crore (US$ 15 billion) will be created, which will be directed towards passenger safety
- All the coaches of the Indian Railways will be fitted with bio toilets by the year 2019
- Railway lines of 3,500 kms will be commissioned in 2017-18.
The other initiatives taken up by the Government are:
- The Ministry of Railways is working on building the world’s highest railway bridge over the Chenab river in Jammu and Kashmir at a cost of around Rs 1,100 crore (US$ 170.79 million), which is expected to be 359 meters (m) above the river bed, 35 m taller than the Eiffel Tower.
- The Indian Railways has introduced various initiatives to improve passenger travel experience, which include finalisation of first reservation chart at least 4 hours before departure, and numerous online booking facilities like wheelchair and disposable bedrolls through Indian Railway Catering and Tourism Corporation (IRCTC) website, among other initiatives
- The Railway Minister of India has launched the first phase of station redevelopment programme, covering commercial redevelopment of 23 out of 400 A1 and A category stations across the country.
- Union Ministry of Railways plan to cover the length and breadth of Arunachal Pradesh by rail network requiring an initial investment of around Rs 50,000 – 70,000 crore (US$ 7.4 – 10.4 billion)at an elevation range of 500 to 9,000 feet.
- The Ministry of Railways has signed a memorandum of understanding (MoU) with the Ministry of Urban Development, under which railway stations in each city included in the SMART Cities and AMRUT scheme will be redeveloped to create an integrated public transit hub around the railway stations and encourage transit oriented development.
- The Government of India and The World Bank have signed a US$ 650 million loan agreement for the Eastern Dedicated Freight Corridor-III (EDFC-III) project, which is expected to enhance railway transport capacity, improve service quality and boost freight carriage on the 401-km- long Ludhiana-Khurja section of the EDFC, along with developing institutional capacity of Dedicated Freight Corridor Corporation of India Ltd (DFCCIL) to build, maintain and operate the entire network.
The Indian Railway network is growing at a healthy rate. In the next five years, the Indian railway market will be the third largest, accounting for 10 per cent of the global market. Indian Railways, which is one of the country’s biggest employers, can generate one million jobs, according to Mr Piyush Goyal, Union Minister for Railways and Coal.
In order to develop three new arms of Dedicated Freight Corridor (DFC) in the various regions of the country, Indian government is planning to invest Rs 3,30,000 crores ($50.98 billion). Also, Indian Railways is planning to invest in order to adopt European Train Control Systems (ETCS) which will help in the development of the infrastructural facilities.
- Increasing urbanization coupled with rising incomes (both urban and rural) is driving growth in the passenger segment. Growing industrialization across the country has increased freight traffic over the last decade.
- Both passenger and freight traffic volumes have increased steadily in the past five years. While passenger traffic witnessed a CAGR of 2.6% during 2010-2015, freight traffic has registered a marginally lower CAGR of 4.3% during the same period.
- The sector runs 22,300 train carrying over 23 million passengers daily and connecting more than 7137 stations. Indian Railways runs more than 9202 freight trains, carrying about 3 million tonnes of freight every day.
- The sector total track length is 117996 Km. It also comprises 68,558 coaches, more than 2,54,006 wagons and 1.3 million employees
- The long-term strategic plan of the Ministry of Railways is to construct six high-capacity, high-speed dedicated freight corridors along the Golden Quadrilateral and its diagonals.
- The sector has taken up port connectivity on priority, through the PPP mode of funding in tandem with the Sagar Mala Project of Port Development. Railways will facilitate connectivity to new and upcoming ports through private participation. So far, in principle, approval has been granted for building rail connectivity to the ports of Jaigarh, Dighi, Rewas, Hazira, Tuna, Dholera, Astranga, Chara and Nargol under the Participative Model Policy of the Indian Railways, amounting to USD 615.38 Million.
- The 2014–15 Union Budget envisages a Diamond Quadrilateral network of high-speed rail, connecting major metros and growth centres of the country.
- The development of identified stations to international standards with modern facilities and passenger amenities on the lines of newly developed airports, through PPP mode.
- Private investment in railway logistics is to be encouraged. Indian Railways proposes to modernise its logistics operations by setting up logistic parks that provide for warehousing, packaging, labelling, distribution, door-to-door delivery and consignment tracking in order to achieve better efficiency; mechanisation of loading and unloading will be given top priority.
- A scheme for private participation in parcel movement will be launched shortly whereby procurement of parcel vans or parcel rakes by private parties will be facilitated.
- To develop a network of freight terminals, the Policy of Private Freight Terminals on the PPP model is being further refined.
- A proposal is in place to harness solar energy by utilising rooftop spaces of railway stations, other railway buildings and land, through the PPP mode.
- During the period of 2012-17, Mass Rapid Transit Systems (MRTS) projects are being planned in Ahmedabad, Bengaluru, Hyderabad, Chandigarh, Chennai, Delhi, Jaipur, Kochi, Kolkata, Mumbai, Patna, Pune, Lucknow and Surat through the PPP model.
- The share of private investment in MRTS projects is expected to increase from 13% during 2007-12 to 42% during 2012-17.
- Rail tourism is on the anvil, with emphasis on the introduction of eco-tourism and education tourism in the North-eastern states, the identification of special pilgrim circuits such as the Devi Circuit, the Jyotirling Circuit, the Jain Circuit, the Christian Circuit, the Sufi Circuit, the Sikh Circuit, the Buddhist Circuit and the Temple Circuit. Specially packaged trains for these circuits have been proposed and private participation will be encouraged.
100% FDI under automatic route is permitted for the following:
- Construction, operation and maintenance of suburban corridor projects through PPP.
- High speed train projects.
- Dedicated freight corridors.
- Railway electrification.
- Signaling systems.
- Freight terminals.
- Passenger terminals.
- Infrastructure in industrial parks pertaining to railway line/siding including electrified railways lines and connectivities to main railway line.
- Mass Rapid Transport Systems (MRTS)
Policy on Participative Models for Rail Connectivity & Capacity Augmentation Projects
Indian Railways are operating in the core sector of the economy. To strengthen, modernise and expand the railway network, the investment requirement is huge. Private sector participation would be required for accelerated construction of fixed rail infrastructure. For this purpose, railways has formulated participative investment models for its existing shelf of projects and also for new projects. These models have only general provisions while the specific issues are decided on a case-to-case basis depending on the model of private investment, Ministry of Railways will either grant direct permission or go in for competitive bidding for award of concession. Under this Policy, the following can participate in the development of railway infrastructure:
- State Governments
- Local bodies
- Beneficiary industries
- Large import and export companies
- Co-operative Societies and other body corporate
- Infrastructure and Logistics providers
- Person of Indian Origin (PIO)
- Overseas Corporate Bodies (OCB) (After foreign investment promotion board clearance)
- Foreign Direct Investor (After foreign investment promotion board clearance)
- State governments offer additional incentives for industrial projects. Incentives are in areas such as rebates in land cost, relaxation in stamp duty on the sale or lease of land, power tariff incentives, concessional rates of interest on loans, investment subsidies/tax incentives, backward areas subsidies and special incentive packages for mega projects.
- Various kinds of incentives on exports are available under foreign trade policy.
Area based Incentives:
- Incentives for units in Special Economic Zones (SEZ) / National Investment & Manufacturing Zones (NIMZ) as specified in respective Acts or setting up of projects in special areas such as the North-east, Jammu & Kashmir, Himachal Pradesh & Uttarakhand.
Tax Incentives R&D Incentives:
- Industry/private sponsored research programmes: a weighted tax deduction is given under section 35 (2AA) of the Income Tax Act. Weighted deduction of 200% is granted to assesses for any sums paid to a national laboratory, university or institute of technology, or specified persons with a specific direction, provided that the said sum would be used for scientific research within a programme approved by the prescribed authority.
- Companies engaged in manufacture, having an in-house R&D centre. Weighted tax deduction of 200% under section 35 (2AB) of the Income Tax Act for both capital and revenue expenditure incurred on scientific research and development. (Expenditure on land and buildings are not eligible for deduction).
- EMD (USA)
- Bombardier Transportation (Canada)
- GE (USA)
- Siemens (Germany)
- Alstom (France)
- Indian Railways
- Container Corporation of India Ltd.
- Dedicated Freight Corridor Corporation of India
- Rail Vikas Nigam Ltd.
- Railtel Corporation of India Ltd.
- Rail India Technical and Economics Services Ltd.
- IRCON International Ltd.
- Rail Land Development Authority
- Mumbai Railway Vikas Corporation Ltd.
- Exchange Rate Used: INR 1 = US$ 0.015 as of October 10, 2017.
Disclaimer: This information has been collected through secondary research and Kohli & Kohli Law Associates is not responsible for any errors in the same