In a first for Indian Railways (IR), the government intends to allow private enterprises to create and operate new, premium passenger services on the country’s rail network. This creates partnership opportunities for Australian companies with relevant rail and finance experience, who should track the course of this procurement.
On 1 July, the Ministry of Railways in Delhi issued a Request for Qualifications (RfQ) to private sector companies for the introduction of 151 modern, 16-coach trains to operate on 109 new routes.[i]
The initiative has triggered commercial interest. During pre-application meetings, a broad range of reputable local and international companies – including potential investors – appeared likely to respond.
The project will entail an investment of around A$6 billion (₹30,000 crore)[ii]. It aims to unlock the intrinsic value of premium rail travel in India by introducing much-needed efficiencies in train operations and offering world-class services for passengers.
According to the Ministry of Railways: ‘the objective of this initiative is to introduce modern technology rolling stock with reduced maintenance … [and to] … reduce transit times, boost job creation, provide enhanced safety, provide world-class travel experience to passengers… [it also aims to] reduce the demand-supply deficit in the passenger transportation sector”.[iii]
Heavy demand for passenger services
There is significant unmet demand in passenger rail services. During 2019–20, around 50 million potential passengers could not be accommodated on trains. During the summer and in festival seasons, demand outstripped supply by an estimated 13.3 per cent.[iv]
As a result of capacity constraints, the railways are steadily losing market share for freight transport.
The Ministry of Railways wants to allow the private sector to operate trains on commercially viable routes. The Ministry’s goal is to capture demand from passengers who would be willing to pay more for improved services, ease of access and comfort.
It is hoped that the private sector’s ability to create efficient, premium railway passenger services will deliver a better travel experience and increase revenue from meeting the demand.
It is anticipated that up to 109 routes will be bundled into 10–12 clusters. With approximately 150 rakes (or train sets) required, this will involve around 12 rakes per cluster.
The Ministry is open to suggestions on what technologies should be incorporated into the sets. The Ministry of Railways is also open to flexibility in terms of the sources of technology, subject to required standards and specifications.
The concession will last for 35 years, and will include the right to collect market price-linked fares. Other features include:
- flexibility for class composition and halts
- the ability to provide value-added and differentiated customer service
- access to Indian Railway’s track and signalling network on payment of fixed haulage charges
- a ‘gross revenue share’ model.
It is anticipated that operations will start three years after contract award, with 100 percent of trains operating within five years.
There will be a two-stage bidding process consisting of a request for qualifications and a request for proposals (RfP). International entities will be eligible, including private companies and funds.[v]
The project offers bidders flexibility in how they deliver the service, and scope for innovation.
For example, bidders may offer to procure coaches either through purchase or leasing. This means non-rolling stock manufacturing companies can participate.[vi]
Operators will also have the freedom to develop premium on-board, value-add services, and to set fare structures accordingly.
Draft specifications include new safety features like electronic sliding doors, noise-free travel systems, double-glazed safety glass windows, passenger and coach surveillance systems, on-board monitoring, and passenger information systems.[vii]
The project has gained interest from reputed local and international organisations. A pre-application meeting organised by the Ministry of Railways saw participation from 23 businesses including Bombardier, Alstom, Siemens, CAF, GMR Infra, Bharat Forge, BEML, L&T Infra, Gateway Rail, Titagarh Wagons, Sterlite, Medha Group.[viii]
A stakeholder meeting to discuss concession agreements was attended by an array of financial institutions, including the National Investment and Infrastructure Fund (NIIF), Macquarie and I Squared Capital.[ix]
Opportunities for Australian companies
This tender creates opportunities for Australian companies with experience of operating sophisticated passenger rail networks.
In addition, there are opportunities for Australian train operators to partner with reputed Indian companies, including those mentioned above.
The project could also open excellent opportunities for Australian SMEs with niche rail-related technologies, including:
- on-board predictive maintenance
- optimisation and scheduling
- systems monitoring and control
- safety and surveillance solutions
- coach interiors and equipment
- on board retail
- on board facility management
- human resources training and skilling.
Companies looking to pursue opportunities are advised to track the course of the procurement to identify successful bidders and train operators in each cluster.
Australian companies could explore approaching companies that are shortlisted at the RfQ stage to showcase their solutions. Contract awards are expected in early 2021.