Business · Current Affairs

Here is how Railways plans to build airport-like stations without spending a penny

HABIBGANJ, MADHYA PRADESH: Habibganj in Bhopal is one of India’s 8,495 railway stations. Like most others in the country, it has partially-roofed platforms with no segregation of departure and arrival lounges, no access control, simultaneous movement of parcels and passengers, haphazard spread of vendors and parking and poor lighting. It may not be that way for long. The station is slated to don a new look by end-2018. A 3,024-sq m concourse will be built for the passengers to lounge around; there will be six lifts, 11 escalators, three travelators, two pedestrian subways, one parcel corridor, a walkway, and a 14,037-sq m parking area that will accommodate 284 cars, 839 two-wheelers and five buses. The blueprint of the station with 6,778-sq m landscaping looks stunning on paper (see picture). So, how much money will the Indian Railways (IR) cough up to engineer this massive makeover? The answer is zero. Rs 100 crore that will be needed for redeveloping Habibganj station is being spent by a private player — Bhopal-headquartered Bansal Group with an annual turnover of Rs 2,000 crore with diversified interests in road construction, education, healthcare, mining, iron and steel. In return, according to the contract, the group receives 45-year-long lease rights for 17,245 sq m prime railway land where it has been investing another Rs 400 crore to develop a trade centre, a hospital, a convention centre, a budget hotel and a luxury hotel, with a built-up area of 13-lakh sq ft. “We are targeting completion of the redevelopment by the end of the next year, even if our contract allows us to drag the project on till December 2019,” says Mohammad Abu Asif, a construction manager of the Bansal group overseeing the Habibganj station development. So, by the end of the next year, India will see its first railway station developed via a public private partnership (PPP). To be installed in the new Habibganj station No. of escalators: 11 No. of walkway: 1 No. of lifts: 6 No. of travelators: 3 No. of parcel corridor: 1 No. of pedestrian subways: 2 The IR’s financial template is pretty simple. India’s second largest landlord with 4.76 lakh hectares —the defence sector, with 7.5 lakh hectares, is the largest — has identified 1,092 hectares of vacant land in the vicinity of 400 stations, which are on its priority list for modernization. Despite three fourths of railway land being used up for tracks and structures, and another 862 hectares under encroachment, IR still possesses 51,648 hectares of vacant land, according to data available till March 31 this year. But IR can use only 10,000 hectares for commercial development, the rest being vacant land along the railway tracks, which renders itself unusable for commercial exploitation. Clearly, the land as the sweetener is the underlying formula for the IR as it embarks on one of its biggest ventures: the world’s largest station redevelopment programme, at a time when the real estate sector is sluggish. 1. Most stations are being redeveloped on PPP model by modifying the Swiss challenge model. 2. Companies showing interest include IL&FS, GMR, Tata Realty & Infrastructure, Brigade Group, Mantri Developers, Raheja, Shapoorji Pallonji, Reliance Infra, Lanco Infratech, Essel Group. 3. Countries such as Malaysia, UK, South Korea and France have shown interest; roadshows organised in UAE and Malaysia. 4. Boston Consulting Group is preparing the overall strategy; EY also roped in. “I concede the real estate market has been a little low in the last few years. So, naturally, the interest shown by the private sector is also low. But we are not deterred by bad real estate market”, said railway minister Suresh Prabhu in an interview to ET Magazine last week (see “This is the Biggest Station Redevelopment Programme in the World”). Key Challenges Real estate market is down. Public sector banks have tightened infrastructure loan portfolios. Local municipal authorities flex their muscles as IR depends on them for water, sewerage, roads, electricity. The Habibganj station development project got delayed as the Bhopal Municipal Corporation and IR disagreed on floor area ratio (FAR), among other issues. Redevelopment on Fast-track The minister’s remark underlines the reason why the IR shifted strategy from a single-track PPP model, as was adopted in case of Habibganj, to multi-pronged financial engineering to undertake this Rs 1 lakh crore exercise. A peek into the blueprints of redevelopment of 65 stations — for which the IR has made tangible progress — demonstrates how it has engaged its zonal arms to redevelop 23 stations through a modified Swiss Challenge method; joined hands with the state governments to redevelop stations (the first being the Bhubaneswar station in collaboration with the government of Odisha) and even cajoled NBCC, a public sector company under the administrative control of the ministry housing and urban affairs, to develop 10 key stations including Tirupati, Delhi Sarai Rohilla, Madgaon, Lucknow, Gomtinagar, Kota and Puducherry. “The railways wanted to give us 40 to 50 more stations, but we want to first experiment with 10 stations before becoming ambitious,” says Anoop Kumar Mittal, chairman and managing director of NBCC. As planned, the construction giant will pump in some initial funds to develop the vicinity of the railway stations and woo at least 30% of potential customers (for commercial buildings) before speeding up the project. Then, there are 12 more stations being anchored by Indian Railway Stations Development Corporation (IRSDC). These include Habibganj and Gandhinagar, the only two stations where construction work can be seen on the ground. At three other stations — Bijwasan and Anand Vihar, both in Delhi, and Surat in Gujarat — tenders have been invited. IRSDC’s chief executive officer Sanjeev Kumar Lohia adds: “The stations and their surroundings will be world class. For example, there will be an 11-storied luxury hotel built on floating slabs in Gandhinagar station. It will look like as if the building is in the air.” Lohia knows the task is daunting. “The challenges are a bad real estate market and the penchant for the local municipalities to interfere in our work.” In Habibganj, for example, the Bhopal Municipal Corporation flexed its muscle as IR had to depend on it for water, sewerage, roads, electricity. The trigger for the dispute that held up the project for over a year was on the floor area ratio (FAR), a formula that guides the total built-up space vis-a-vis open area. There was little scope for the row to take a political twist as the same party, the BJP, is at the Centre, the state and also the local municipality body. But the issue was brought to the notice of the then-Attorney General Mukul Rohatgi so that there could be a resolution. After interpreting various sections of the Railways Act, 1890 and the Railways Act, 1989 — the latter had replaced the former — and also of Madhya Pradesh Nagar Tatha Gram Nivesh Adhiniyam, 1973 (a local act), Rohtagi gave a four-page-long signed legal opinion dated November 23, 2016. This writer has reviewed the content of Rohatgi’s opinion. The last para which sums up the spirit of his argument reads like this: “…local authorities must be taken into confidence but that does not mean that the Railways require their concurrence”. Rohatgi is no longer the attorney general; KK Venugopal replaced him on June 30. At least two railway officers told ET Magazine that Rohatgi’s legal opinion, though put forward specifically for Habibganj, did a big favour to the IR by creating a precedent, thereby helping it fast-track the railway station redevelopment project across India. “After all, if the local authorities create hurdles, the railway station redevelopment programme will take many years,” quips one of them. Private Bogies For the private sector, which had a bad run with the IR in container train operations — it was opened for the private sector in 2006 — the second innings is naturally one with a tentative opening. Infrastructure companies are plagued by bad debts, and are in no position to invest. “Infrastructure companies are hit hard as banks have tightened their loan profile. But it’s a passing phase,” says OP Agarwal, former urban transport adviser in the World Bank. Senior executives of prominent core sector companies are not willing to share their comments on the railway project. But the IR’s internal reports have clearly indicated that the companies such as IL&FS, GMR, Tata Realty, Brigade Group, Mantri Developers, Raheja, Shapoorji Pallonji, Reliance Infra, Lanco Infratech, Essel Group have shown interest by attending the IR’s programmes, following those up and contacting key officials. For example, Tata Realty and L&T could vie for Chennai Central station whereas for Vijayawada the battle till now could between the GMR and the IL&FS. Reports suggest that there is a major interest of at least 10 companies for bidding for Mumbai’s Lokmanya Tilak Terminus station. “Private sector was not always comfortable working with the railways. But the positioning of the project more as a semi-real estate one rather than a pure railway project is clearly a masterstroke,” says Vinayak Chatterjee, chairman of Feedback Infra and one of the early votaries of PPP in India. One station project may call for roughly Rs 1,000 crore: Anoop Kumar Mittal, CMD, NBCC All 100 smart cities have at least one railway station. So, the question of linking smart cities with station development is natural for the sake of an integrated development of a city. The idea is to develop not just a railway station but its surrounding as well. As the NBCC is already redeveloping projects in many cities, we were recently given the responsibility of redeveloping 10 railway stations. The Railways wanted to give us 40 to 50 more stations, but we want to first experiment with 10 before becoming ambitious. We have already asked for expressions of interest for design of the redevelopment of those stations. It’s an open competition. At the same time, we have begun discussions with the state government and the municipal corporation concerned as the nearby municipal land also needs to be developed simultaneously. We have also begun the process of appointing the agency that will execute the redevelopment as a PPP model. Another financial model is where we will initially spend some money to redevelop the surrounding area, which will be sold or leased out to private parties. The redeveloped station will be handed over to the Railways and our returns will come from redevelopment of the nearby areas, including its air space. The redevelopment of a station will call for `100-150 crore, but the entire project, including development of nearby areas, may call for `1,000 crore or so, depending on the location. So, we will look for at least 30% assured buyers before pumping in money in redeveloping the commercial areas. There will be more concrete action in the next three months, and I expect actual work on the ground in one or two stations to begin by December itself. This is the first time that we are working with the Indian Railways. The railway stations that we are developing are the properties of the Indian Railways. So, we won’t succeed unless there’s full cooperation from the Railways.
Source: ET

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