Sandeep Upadhyay, the managing director and chief executive of Centrum Infrastructure Advisory, says partnering with private sector firms will bring in new expertise
"There is an acute need to upgrade the railway infrastructure"
Sandeep Upadhyay, the managing director and chief executive of Centrum Infrastructure Advisory, discusses the opportunities in India's rail sector:
With the challenges facing Indian Railways, is there scope for companies to get involved?
For a country as vast as India, [travelling by rail] is perhaps the most critical mode of transportation enabling passengers as well as cargo movement. To remain competitive vis-à-vis other transportation segments and to provide an optimum level of service to passengers and freight, there is an acute need to upgrade and expand the railway infrastructure
What business opportunities exist?
The Indian railway network is growing at a healthy rate. In the next five years, the Indian railway market will be the third largest, accounting for 10 per cent of the global market. The private sector can bring in expertise in areas such as station development. In the years to come, opportunities could be available to the private sector to run trains, which is already a popular model in Europe. Partnering with private sector logistics providers and other transporters will be key to ramping up rail traffic fast.
What is the government doing to attract investment?
The government of India has working with the World Bank on designing a Railways of India Development Fund to attract private investors to commercially viable projects in the railway sector.
What would this involve?
This instrument is envisaged as a fund with long-term exposure to India’s core infrastructure sector. RIDF is expected to invest in commercially-viable railway projects via equity, debt and leasing products backed by a strong sponsor and an independent fund manager.
Are there other steps that could be taken to encourage more companies into the sector?
Leveraging the PPP (public-private partnership) framework could further catalyse development in the otherwise cash-starved sector, which at the moment is largely regulated and much dependent on budgetary sources to meet the capital expenditure requirement.
Should there be more involvement from private players?
Indian Railways is at an inflection point. The challenges are being tackled head-on with the right focus on network expansion and improvement, customer safety, customer experience and financial sustainability. Strategic execution of critical projects through enhanced engagement with the private sector could fast-track growth of railways. It would bring in efficiency and promote healthy competition for setting up and maintaining a world-class infrastructure.