PPP rail projects aren’t likely
to sell themselves because
of India’s poor track record
on railway projects, including rampant delays due to
land acquisition problems
and costly time and budget
overruns. The PPP model
has worked well for port
and road projects but is
relatively uncommon in rail. The government’s
database lists 1,339 PPP projects—eight of which
are railway projects. Five of those have been completed, while three remain under construction due
to delays. One project began in 2007 but stalled
in 2009 due to objections from people whose land
had been acquired for the project. The government
only recently approved compensation payments.
Success for future PPP projects comes down
to how well the government crafts contracts,
industry analysts say. It must correctly define
technical specifications, accurately estimate project costs and detail all risks the private sector is
expected to assume.
“The private sector will only take on certain
types of risks,” says Arvind Mahajan, head of
infrastructure and government services, KPMG,
a PMI Global Executive Council member, Mumbai, India. Mr. Mahajan says the private sector is
well-suited to take on the operation of rail lines
or to replicate successful projects such as the
Delhi Metro, but it is less equipped to handle
land acquisition, safety issues or first-time initiatives like high-speed rail, for which cost and
project outlays are difficult to estimate.
Abhaya Agarwal, partner, infrastructure and
PPP advisory, Ernst & Young, New Delhi, India,
says the state-owned Indian Railways should dem-
India’s railway system has no high-speed lines—but that could change if investors respond to the
government’s call for private and foreign funding.
INTO HIGH GEAR
“If there is a
with low risk,
I don’t think
there will be
any dearth of
—Abhaya Agarwal, Ernst &
Young, New Delhi, India
Mumbai-Ahmedabad line: The 545-kilometer (339-mile)
“showpiece project” that Prime Minister Modi is keen on
would be the country’s first high-speed line. A study of the
INR600 billion project is scheduled to be completed in May 2015.
New Delhi-Patna line: The proposed 1,044-kilometer (649-
mile) project would cost an estimated INR1,300 billion. A
project prefeasibility study has been completed by U.K.-based
engineering firm Mott MacDonald.
Diamond Quadrilateral (Delhi-Mumbai-Chennai-Kolkata):
The massive high-speed project, which the new government
voiced support for in June, would lay at least 6,500 kilometers
( 4,039 miles) of track so trains could travel more than 300 kilometers (186 miles) per hour among India’s four major cities.
serve as a model
for PPP projects.