The railways’ widened ambit of public-private partnership (PPP) for implementing projects has got industry

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all excited.

Reaffirming the objectives in her vision 2020 document, Mamata Banerjee’s budget on Wednesday enu-nciated PPP proposals to attract domestic investment in a wide range of areas, from new lines to world-class stations, auto hubs to ancillary industries, rolling stock manufacture to multi–modal logistic parks, high-speed train corridors to port connectivity, and multi-level parking to mine linkages.

This takes the PPP model way beyond projects like wagon ownership or running yatri nivas where the model was earlier sought to be used. The budget expands the model to include bottled drinking water units, refrigerated container factories and axle manufacture.

The corporate sector and analysts agree that the PPP model in the railways has so far seen only limited success. But they are nevertheless enthusiastic about the new thrust that the railway budget has given. Citigroup economist Rohini Malkani is one of them.

Rajeev Jyoti, president & managing director of Bombardier Transportation India, sees PPP as an area that needs long-term commitments.

The PPP modalities are yet to be evolved. And industry will watch if the terms and conditions are acceptable from the point of view of global dimensions. Jyoti is emphatic that PPP should have a clearly defined exit policy, in case a company wants to quit a partnership.

At the moment there is no standard for railway PPP deals, as is there for road projects.

Ajay Sinha, regional director of corporate development, EMD Locomotive Technologies, welcomes the PPP move thus: “This is a great move.” But the private partner also has to understand how it can earn revenue. “There has to be clarity in the agreement on sharing revenues.”

But not every company is excited by the PPP offer. Bisleri, India’s largest bottled water company, is one of them. Its chairman & managing director, Ram-esh Chauhan, is not interested in a partnership with the railways.

Most, however, worry about the long gestation periods of railway projects and the lack of clarity on how PPP projects will be structured.

“As PPP goes from simple to complex models, many issues will come up. For instance, high-speed passenger corridors developed in PPP mode will have their own specific issues,” says Siddhartha Das, PPP practice leader at Ernst & Young. How will tariff be decided? Which factors will warrant tariff changes?

In another example, he says that though the minister’s objective could be cheap drinking water bottled in a PPP plant, pricing could become a thorny issue. Industry hopes that the task force to be set up to clear proposals for PPP investments within 100 days will bring some clarity.

For now, however, the policy announcement has evoked interest. “By announcing a special structure to expedite project clearance and their implementation, the minister has encouraged investors,” according to Ficci president Harsh Pati Singhania.

(With inputs from Shruti Verma, Jayashree Maji & Zehra Naqvi)