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The Economic Times

Title : ET Exclusive - Govt Considering a Railway Regulator

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Article Date : 08/14/2014

Body likely to settle any issues between investor and railways, may be asked to fix passenger,
freight tariffs
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 foreign direct investment (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 clearcut 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 public-private
partnerships (PPPs) in his July 8 rail budget as part of proposals aimed at generating funds to strengthen
the mammoth, crumbling network.
A massive amount of money is needed to fund ongoing and future rail projects, with the Golden
Quadrilateral Network alone requiring an additional `9 lakh crore, while each proposed bullet train will
need an investment of `60,000 crore. The Cabinet approved 100% FDI in suburban corridors, high-speed
train systems and dedicated freight line projects implemented as PPPs.
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 and atmosphere. Those who did invest ini tially 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, for example, that they could not transport foodgrain and
coal, the officer said.
The railways did the same thing in private freight terminals. When private investors started making
profit, the railways changed the policy to appropriate this for itself. Other policies ensured that projects
were rendered useless, according to investors. Under the Wagon Investment Scheme of the railways,
Jindal Rail Infrastructure set up a factory in Vadodora to manufacture specialised wagons to carry
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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 bureaucratic procedures, the officer said.
The station development programme using the PPP model also 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 in the past four years. Nobody wants to do business with the railways, another
railway official said. If the railways are serious about getting private investments -domestic or foreign -
they need to do it fair and square.
A regulator should go a long way toward sorting out such issues.
The only avenue for private investors who feel cheated by the railways is the competition commission.
The commission goes strictly by the contract, where the fine print provides a lot of leeway to the
railways, the official said.

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