Indian Railways has as much as $65 billion worth of pending projects with almost half of them being under construction for more than five years, leading to cost-escalations and making many of them un-bankable, according to a PhillipCapital India recent report.
Of these, 83 per cent are construction related – new lines, doubling and gauge conversion – while the rest are related to road safety, signalling and telecom, and investments in production workshops and metro projects. About 61 per cent of the total construction related projects are becoming un-bankable, says the the PhillipCapital report.
Further, it added, “If IR were to execute its $65 billion of pending projects, it would have to take away four years of its budget (on FY2017 base of Rs 1,200 billion), leaving no room for new projects. However, due to its prioritisation, we believe it can now award Rs 2,500 billion ($37 billion) of new projects over FY2017-2020, which otherwise would not have been possible.”
Execution delays, so far, have largely been on account of new line projects due to the challenge of land acquisition. This has made Indian Railways focus on prioritising execution of network decongestion projects and road safety works, “as these projects are more bankable and do not face issues such as land acquisition”, the report added.
Indian Railways is looking to invest in high-speed trains and laying new tracks. It is known to be working to get speedy approvals for its projects and turning execution faster, and is also in the process of adopting new train technology that can run up to a speed of 500 km per hour. Several global companies like Hyperloop Technologies Inc, Spain’s Talgo SA, Germany’s Siemens AG and Knorr Bremse AG, are trying to woo Indian policymakers with their technologies for Indian Railways.
Indian Railways would need about Rs 3,894 billion or $53 billion to execute pending projects and network decongestion orders over FY2017-2020, according to PhillipCapital. Of this, 30 per cent of the funds are expected to be met through budgetary support (GBS), 38 per cent through loan funds (Life Insurance Corp. of India), 20 per cent from internal resources (depreciation, safety and development funds), and the balance through Indian Railway Finance Corp (IRFC).
Ordering activity from Indian Railways is expected to rise this year. This will be a positive for companies, including Larsen and Toubro Ltd (L&T), Bharat Heavy Electricals Ltd (BHEL), KEC International Ltd, Crompton Greaves Ltd, Siemens India, Timken India, Kalpataru Power Transmission Ltd, Titagarh Wagons Ltd, Texmaco Rail and Engineering Ltd and others.
