Union Government signed MoU with Chhattisgarh for development of railway infrastructure

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Who: Union and Chhattisgarh Governments
What: Signed MoU
When: 9 February 2016
Why: For development of railway infrastructure

Union Railway Ministry on 9 February 2016 signed Memorandum of Understanding (MoU) with Chhattisgarh Government for formation of Joint Venture Companies for development of railway infrastructure in the state.

The Joint Ventures with states for focused project development, resource mobilization, land acquisition, project implementation and monitoring of critical rail projects.

Salient Features of the MoU

• The MoU envisages formation of a Joint Venture companies having 51 percent stakes of the respective State Government and 49 percent stakes of Union Ministry of Railways. Thus, the JV companies shall be fully owned by the Government.

• The ministry of Railways will sign a concession agreement of 30 years with the project SPV for safe and sound operation, revenue sharing and providing technical & marketing logistics to the SPV. The revenue sharing shall be based on already established formula being used for inter zonal apportionment of revenue.

• The ownership of the land shall vest with the SPVs which is a departure from previous practice. This will give financial leverage to the company to exploit commercial potential of the land. This is likely to result in making project viable which are otherwise not viable.

• At the end of concession period, the railways will have option to take over the assets at a nominal price. This is largely in line with average codal life of the assets as most of the assets will need large scale replacement after 30 years.

• To expedite the projects, Railways have been trying to mobilize resources through other than Gross Budgetary Support.

• Indian Railways have targeted to commission 2000 Km New Lines, 4000 Km Gauge Conversion and 11000 kilometers Doubling/Tripling/ Quadrupling projects over 5 years that is from 2015-16 to 2019-20.

• Formation of Joint Venture Companies with the State Governments will go a long way in faster commissioning of critical rail infrastructure projects as it will not only help in mobilization of funds but also in facilitating various clearances and land acquisition.