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India Discusses 85 Billion Rupee Rail Plan With Reliance, Tata

India Discusses 85 Billion Rupee Rail Plan With Reliance
B.N. Rajasekhar, managing director of Dedicated Freight Corridor Corporation of India Ltd. Photographer: Prashanth Vishwanathan/Bloomberg

Jan. 19 (Bloomberg) -- India’s government discussed a possible venture with Reliance Infrastructure Ltd., Tata Group and Larsen & Toubro Ltd. to build an 85 billion rupee ($1.9 billion) stretch of national freight railway.

GMR Group and GVK Group were also among companies at a meeting on the proposal about six weeks ago, B.N. Rajasekhar, managing director of state-owned Dedicated Freight Corridor Corp. of India Ltd., said in a Jan. 17 interview in New Delhi. The government is also considering offering additional work including maintenance, he said.

“Gone are the days when the government could put its own money and do everything,” said Rajasekhar. “Getting new private funds is essential.”

India has also sought about $9 billion of loans from the World Bank and Japan for the planned freight railway that will link major cities by March 2017 and halve shipment times. The government is backing the 770 billion rupee plan as it works to ease transport logjams in Asia’s third-biggest economy.

“If the economy continues to boom, then we’ll need the dedicated rail-freight corridor,” said Abhaya Agarwal, the leader for public-private participation projects at Ernst & Young in New Delhi. The planned venture could draw “a lot of interest,” he said.

Rail Network

Dedicated Freight may invite private participation in a 530-kilometer (329-mile) section linking Son Nagar and Dankuni, both in eastern India, Rajasekhar said. The Ministry of Railways may decide by as early as March what role private companies may be able to play and how long concessions would last for, he said. Rajasekhar is also an Additional Member on the Railway Board, the main policy body at the Ministry of Railways.

Larsen & Toubro, India’s largest engineering company, GMR Group and Reliance Infrastructure declined to comment in e-mailed responses to questions. Christabelle Noronha, a Tata Group spokeswoman, declined to comment. G.V. Sanjay Reddy, vice chairman of GVK Power & Infrastructure Ltd. didn’t immediately respond to e-mailed questions.

Dedicated Freight’s network will comprise two corridors totaling about 3,300 kilometers, according to the company. One will run from Ludhiana, in northern Punjab state, to Kolkata on the eastern coast, while the other will link New Delhi with Mumbai on the western coast. The two will intersect at Dadri, near the capital.

The World Bank may decide this year whether to grant a loan of as much as $3.5 billion to help pay for part of the eastern corridor, said Dedicated Freight’s Finance Director R.K. Sinha. The Japan International Cooperation Agency will probably decide on a 450 billion yen ($5.4 billion) loan that will support the western corridor within three months, he said.

To contact the reporter on this story: Subramaniam Sharma in New Delhi at ssharma@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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