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Infrastructure: Mega Monetisation Drive

The redevelopment of Indian Railways’ stations as well as airports are among the lowest hanging fruits in the ambitious National Monetisation Pipeline provided it’s executed well — that is, attracting well-meaning private investors

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The monetisation of assets of Indian Railways (IR) and roads together account for 53 per cent of the total asset monetisation pipeline of Rs 6 lakh crore over FY22-FY25 envisaged under the ambitious National Monetisation Pipeline (NMP) announced by Nirmala Sitharaman, the Union Minister for Finance and Corporate Affairs. In actual money terms, the monetisation of assets across roads, Railways and aviation sector is pegged to generate Rs 3,33,478 crore for the exchequer over the next four financial years. However, in order to implement this plan, the government has to put forth a clear plan of action that manages to attract financially viable and well-meaning private players who would continue to operate the assets on a long-term lease without any future hiccups.

The monetisation of national highways and expressways (26,700 kms earmarked under NMP) is crucial. The annual monetisation value has been arrived at by multiplying the annual phasing of assets considered for monetisation (in kms) and the multiple (in Rs. crore per km). Since 2017, the National Highways Authority of India (NHAI) has been successfully monetising its brownfield road assets through Toll Operate Transfer (TOT)-based Public-Private-Partnership (PPP) concessions. The TOT model has since matured and is now an established model with a model concession framework already in place. Another method of monetisation that has seen traction in the recent past is the InvIT model. A number of road assets have been monetised through InvITs by private sector players. The assets of IR (especially railway stations) that are typically centrally located in prime locations having high commercial potential due to access to key logistics corridors have encouraged the government to move ahead with their monetisation plan. While the sceptics have already begun popping holes in the NMP outline, the government is quite convinced of the success of NMP. And there are sound reasons for that. Since its commercial potential has largely remained underutilised, the government expects it to whet the investor appetite. Greatly helping the cause will be the railway station development agenda. “It lies at the heart of the sector’s monetisation drive,” says a senior official of IR. That is the reason the government has earmarked 400 railway stations to be monetised over the next four financial years with 40 stations earmarked for FY22.

In the aviation sector, the Airport Authority of India (AAI) handles 35 per cent of the domestic air traffic via its 103 airports (135 million passengers). Post-Covid, the number of Indians flying domestically is expected to multiply exponentially with more destinations being added by leading private carriers. Anticipating the latent demand for affordable flying, a large number of AAI-owned airports are under redevelopment and expansion under the PPP model. Several more airports are queued for bidding by the private operators soon. Apart from an upfront lump sum payment expected from the successful bidder, per-passenger revenue (Rs 120-175) would also be charged with certain minimum and maximum threshold criteria embedded in the proposed contracts. The aviation ministry expects at least a three-fold jump in revenue from airports that are currently handling over 4-6 million passengers annually (and are expected to see a major surge in passengers in coming years). These include airports at Lucknow, Guwahati, Patna, Trichy, Port Blair, Chandigarh, Amritsar, Dehradun, Leh, Agartala, Varanasi,
Bhubaneswar, Indore, Raipur and several more.

Monetising Railway Stations
The railway stations were divided into three categories—Tier-1 (50 stations), Tier-2 (100 stations), and Tier-3 (250 stations) based on the commercial potential and potential scale of development. The median capex per railway station is pegged at around Rs 400 crore. Of the Rs 1,52,496 crore monetisation plan for IR, nearly half the amount (Rs 76,250 crore) would be generated from railway station development. The government plans to monetise at least Rs 17,000 crore in FY22 from railway station development. The balance amount is divided under various heads including passenger trains, tracks, dedicated freight corridor, good sheds among others.

The presence of a dedicated Special Purpose Vehicle (SPV) — Indian Railway Stations Development Corporation (IRSDC) along with Rail Land Development Authority (RLDA) helps in streamlining the process. IRSDC is at the forefront of developing new stations and redeveloping existing railway stations. And there are some success stories to showcase as well. Bids would be invited to private operators and the successful bidder would manage the redevelopment of the selected stations for 50-99 years concessions in lieu of an upfront premium and annual concession fees. The private operator would then get the rights to monetise the stations, land around it and create infrastructure. The redevelopment of stations would be on the PPP model to be executed in coordination with IRSDC.

World-class Stations

The redevelopment of railway stations is a priority agenda of the government as it will transform the area in and around the railway station into a ‘Railopolis’ – a mini-smart city with mixed-use development. “In a Railopolis one can live, work, play and ride. Thus, it attracts huge investment and business opportunities,” says SK Lohia, MD & CEO, IRSDC who has a few successful examples to showcase. Gujarat’s Gandhinagar Capital Railway Station, symbolising the new face of Indian Railways, was recently dedicated to the nation by Prime Minister Narendra Modi. Endowed with best-in-class amenities, the station has been redeveloped as a futuristic urban space and is a formidable step for-ward in fulfilling the aspirations of ‘New India’, says Lohia. It has also achieved a unique distinction of India’s first railway station redeveloped at par with airports. The redeveloped station provides state-of-the-art amenities to passengers. This redevelopment project will also bolster real estate and tourism prospects and catalyse a flurry of economic activities in the region, perhaps contributing to the asset monetisation drive soon.

As Lohia puts it, the Gandhinagar station (with a total cost of Rs 800 crore) has several firsts to its credit, including a five-star hotel over live railway tracks and a one-of-its-kind column-free platform roof with the largest span in Indian Railways. “It is a unique, column-free sleek, and economical space frame of 99-metre (105m curvilinear) span over the platform (longest such span in Indian Railways comprising 120 kg/sqm steel only) with all-weather proof aluminium sheeting,” he adds.

Another station that is nearing completion is Habibganj Railway Station, Bhopal. The station is being redeveloped by IRSDC along with Bansal Pathways Habibganj on PPP model. The total cost of the project is pegged at Rs 400 crore. The redevelopment work is modelled on the lines of Germany’s Heidelberg Railway Station with facilities at par with international standards. This station has the distinction of being the first PPP project of station redevelopment in the country. The railway station has been redeveloped as per ‘Green Building’ norms with solar energy and energy-efficient equipment installations and wastewater treatment for reuse.

Gandhinagar and Habibganj are not the only projects. Additionally, work at the Bijwasan (Delhi) by IRSDC and Gomtinagar (Lucknow), Ayodhya, Delhi Safdarjung and Ajni (Nagpur) stations is also under progress by Railways and other agencies. The redevelopment of the iconic Chhatrapati Maharaj Shivaji Terminus (CSMT) is one of the flagship projects of IRSDC. “Nine bidders have been shortlisted in the RFQ (Request for Qualification) process, and IRSDC will soon float an RFP (Request for Proposal),” Lohia says. An EPC contract has been awarded for the redevelopment of the Bijwasan Railway Station and the work is in progress. RFQ for the redevelopment of Udaipur, Surat and Udhna station has been recently floated. Apart from these, IRSDC will also shortly invite RFP for the redevelopment of Gwalior, Nagpur, Amritsar, Sabarmati railway stations.

Challenges Galore

The redevelopment work at a railway station is riddled with challenges. The foremost challenge, says Lohia was to devise standard benchmarks and implement best practices in station redevelopment. “There was no precedent of such a model in India and everything had to be done from first principles,” he adds. “The foremost challenge faced during the redevelopment of both the stations was carrying out construction works in operational railway stations where we had to routinely work under power/traffic block i.e. where trains have to be stopped for a certain duration and planned work has to be completed in that duration only to avoid disruption to normal train services. The redevelopment work of a railway station is akin to conducting a beating heart surgery on an athlete while he is running the marathon,” says Lohia. For instance, the Gandhinagar Capital Railway Station is the first station to host a five-star hotel over live railway tracks. It is a civil engineering marvel that was executed following a well-thought strategy. Vibration and acoustics studies were conducted through a reputed international consultant to ensure the passengers in the concourse and guests in the hotel do not experience discomfort during the passage of trains.

The key challenges encountered during the Habibganj Railway Station were related to the novation of existing contracts, design of air concourse, and cover over the platform, subway, deep excavation at running platforms in the vicinity of live signal cables (107 pairs), scheme finalization of air concourse construction etc. besides execution of significant work of concourse/subways during traffic block. Aviation Projects The indicative monetisation value over FY22-25 for the aviation sector is kept at Rs 20,872 crore which entails 25 airports under the Airport Authority of India (AAI). Why? Because India has seen massive growth in the airport sector with investments from both government and the private sector. “The country has become the third-largest domestic civil aviation market in the world and has immense potential to grow further,” says Civil Aviation Minister Jyotiraditya M. Scindia.
In total, 25 major AAI airports are being considered for monetisation over FY 2022-25 period. The larger objective is to focus on monetisation of these 25 airports, while bundling of smaller airports may be explored based on market testing of transactions and investor feedback, a senior official said. During FY 22, AAI has identified 6 airports—Amritsar, Varanasi, Bhubaneswar, Indore, Raipur and Trichy—for the purpose of monetisation through brownfield PPP models. To ensure commensurate development of non-profitable airports along with the profitable airports with the help of private sector investment and participation, pairing / clubbing of smaller airports with each of the six bigger airports and leasing out as a package is being explored. Further, divestment of AAI’s residual stake in four airport JVs has also been considered under the monetisation pipeline. This includes the private sector operated airports in Mumbai (26 per cent stake), Delhi (26 per cent stake), Hyderabad (13 per cent stake), and Bangalore (13 per cent stake).

How much work is completed on ground? What is the status of some of the airport projects currently under redevelopment? Sandeep Gulati, Regional CEO, South Asia and MD, Egis India, the company handling a large number of projects in the infrastructure space including metros and airport development, says, “Over 40 per cent of the Lucknow airport project is completed. The expected completion is March 2022 for Phase 1 and March 2023 for the whole project. The estimated project cost is Rs 1,000 crore.” Trichy International Airport, part of the list of identified airports up for monetisation, is 50 per cent complete, Gulati adds. The project is expected to be completed by October next year.

What were the typical challenges faced by an infrastructure developer? “While work continued on ongoing projects, no new projects were launched during 2020 and during 2021 thus far. After the first wave ebbed to a large extent around October 2020, passenger volume had picked up significantly and aviation activity was back to decent levels,” says Kshitish Nadgauda, Senior Vice President & Managing Director, Asia, WSP/Louis Berger International, the company responsible for the major landmark projects including Delhi Metro, Chenani-Nashri tunnel project, Hyderabad metro project, several smart cities and the Navi Mumbai airport among others.

Pandemic, especially the second wave did impact the onsite construction work even though the public-sector clients and organizations and private-sector contractors worked closely and collaboratively in the joint endeavour for projects to continue to progress. “However, the infrastructure sector is also witnessing rising costs due to an increase in the price of raw materials, driven by the steep rise in recent months of diesel and petrol prices,” says Nadgauda. “Procurement challenges faced by vendors is also a reason for rising costs since supply chains have been disrupted during the pandemic and lockdown,” he adds.

Overall, the success or failure of NMP depends a lot on the ongoing and near-completion infra-projects under the National Infrastructure Pipeline. Certainly, monetisation of airports and the surrounding infrastructure, railway stations and roads can generate the much-needed cash for the government. It will ultimately boil down to the fine print of the contracts, interest and commitment of the private sector investor and the necessary backing and encouragement from the authorities.

‘Egis Has More Than 100 Active Projects’
Sandeep Gulati, Regional CEO, South Asia & MD, Egis India, talks to Ashish Sinha about the National Infrastructure Pipeline and Ongoing Projects. EXCERPTS:

Please update us on the Metro projects under Egis.
Egis India rail projects include the eight Mass Rapid Transit System (Metro) and Semi-High Speed Regional Rail Transit System around Delhi, Chennai, Kolkata, Mumbai, Nagpur, Bengaluru (airport metro) among others. Chennai Metro is the first metro project for Egis in India. For the Kolkata Metro line, 7.2 km has been commissioned with seven stations, the project cost is Rs 8,575 crore. The scheduled completion date is December 2021.

What are the challenges facing the infra projects, especially post-Covid?
There hasn’t been a major impact on large infrastructure projects during the second wave. Last year, projects were hampered because of sudden impact, extended lockdown and labour migration. In the second wave, construction firms were better prepared and took adequate precautions for safety of their workforce. Hence, there wasn’t large-scale labour migration from sites and infrastructure construction is so much mechanised that progress didn’t suffer.

Overall, how many infrastructure projects under Egis India are currently active?
Egis has more than 100 projects active at this point in time across the country and across metro rail projects, water projects, urban projects, smart cities, highways, airports, ports etc. It helps us have a long pipeline worth more than Rs 500 crore and spread across many years.

What are your views on the National Infrastructure Pipeline and its progress?
A positive sign has been the continued push towards creating infrastructure particularly lead by road construction. A lot of activity has been seen in rail, ports, metro and renewable projects. Project funding is a point of concern. The Budget envisages around 20 per cent private investment in infra projects. Achieving that target seems unlikely.