Railway projects arouse interest from Indian cement producers

Railway projects arouse interest from Indian cement producers
13 February 2013

With Indian railways showing a renewed focus on private partnerships, Jindal, Adani and a consortium of cement companies (UltraTech, Prism and Madras Cement) have been linked to several port connectivity projects, according to Business Standard (BS).

The railway expects to raise around INR50,000m (US$928.1m) from the investment in port connectivity projects over the next five years. To begin with, it expects investment worth INR38,000m from the private sector for six port connectivity projects, with the cabinet approving the participative models of rail connectivity.

The already approved port projects are Dighi (50km), Rewas (23.9km), Jaigarh (35km), Dhamra (64km), Astaranga (80km) and Hazira (47km). While there was no set policy for port connectivity project undertaken through private investment earlier in Kutch and Pipavav, the models approved for first-mile and last-mile connectivity now are private line, joint venture, customer-funded and build, operate and transfer (BOT) projects.

A senior railway ministry official told B: “With the agreements for five models in the policy getting ready in another two to three months, we expect to achieve around 75 per cent of the INR50,000m target from port connectivity projects in the 12th Plan. In addition, we are hopeful of attracting more private investments, as stakeholders have been kept in the loop during the process of formation of this policy.

“We did not get much response from the earlier public-private partnership (PPP) policy, and although there was response from strategic investors like ports, they had no other option,” said an official.

However, the railways found it tough to attract investments in joint ventures and customer-funded models as these models had bankability issues. Lenders had questioned the revenue stream of projects under these models.

The new joint venture model of the first- and last-mile connectivity projects has removed the cap of 14 per cent rate of return on investment.

Published under Cement News