PM Network - December 2014

India’s Rail Travails

One of the world’s largest railway systems is in dire need of a makeover. India’s creaky, colonial-era railway network covers 65,436

kilometers ( 40,660 miles) and moves 8. 4 billion people annually. The government has called for INR2 trillion in investments to bring the system into the 21st century, but modernization is no small feat: Politically sensitive low fares prevent the system from being able to fund capital projects, and a nettlesome bureaucracy slows down their execution.

Newly elected Prime Minister Narendra Modi announced his solution to these formidable challenges in July: public-private partnerships (PPP). Announcing a new budget, his railway minister said he expects US$1

billion in private investment during the fiscal year ending 31 March 2015 to inject capital in projects expanding freight and passenger rail services and introducing high-speed rail. To reach this goal, the government has for the first time allowed 100 percent foreign direct investment in rail projects.

Reaction to the PPP strategy was mixed, however. Harsh Dhingra, chief country representative for Bombardier Transportation India, echoed the optimism of some investors when he called the Modi administration move “a win-win situation for private players and the Indian Railways” in an interview with The Hindu. His company set up a plant in the Indian state of Gujarat in 2008 to build trains for the Delhi metro, and is now bidding for similar projects in other major Indian cities. But Manish R. Sharma, executive director of capital projects and infrastructure at PwC India, voiced skepticism: “There is nothing in this entire budget which tells you how they will make it attractive for private sector,” he told Reuters.