After FDI in railways, government mulls independent regulator to strengthen rail infrastructure

NEW DELHI: The government is considering the establishment of an independent regulator for the railways now that the sector is being opened up to overseas investment as India looks to strengthen its rail infrastructure, especially since the attempt to attract domestic private money in some areas hasn’t been too successful thus far.

The Cabinet approved FDI in railways along with defence at an August 6 meeting during which a regulator was discussed. The government also wants a transparent model that will make such investments attractive to private investors with clear-cut clauses on recovering money. Existing domestic private investors in approved projects aren’t too happy — complaints of unfair practices and high-handed officials are rife.

"The regulator will settle contractual disputes and any unforeseen issues that may arise between the investor and the railways," a senior railway official told ET. The same regulator may be given the task of fixing passenger and freight tariffs.

Railway minister DV Sadananda Gowda announced the FDI plan and encouragement to PPPs in his July 8 rail budget as part of proposals aimed at generating funds to strengthen the network.

A massive amount of money is needed to fund ongoing and future rail projects, with the Golden Quadrilateral Network alone requiring an additional Rs 9 lakh crore, while each proposed bullet train will need an investment of Rs 60,000 crore. Several railway officers and experts doubted that investors would find the sector attractive under the current circumstances.

"The railways have failed to get domestic private investors due to their unwelcoming work culture. Those who did invest initially ended up regretting their decision and vowing never to get into a working relationship with the railways," said a senior railway official who has dealt with several disgruntled investors.

He cited the example of container terminals set up under a policy initiative in 2007 by then rail minister Lalu Prasad. "Fourteen people were given licences to develop the terminals, including wagons, tracks and the rolling stock. When it was done and they started earning some profits, railways changed the goalposts and restrictions were imposed. They were told that they could not transport food grains and coal," the officer said.

When private investors started making profit, the railways changed the policy to appropriate this for itself. Under the Wagon Investment Scheme, Jindal Rail Infrastructure set up a factory in Vadodara to manufacture specialized wagons to carry automobiles.

"It has been five years since the wagons were rolled out but not even a single one has been used yet because of the railways’ tedious procedures," the officer said.

The station development scheme using the PPP model failed. Four railway stations —New Delhi, Bijwasan, Anand Vihar and Chandigarh — were identified to begin with but the railways have not got any money under this plan.