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CAG pulls up Railways over PPP projects

July 24: The Comptroller and Auditor General (CAG) of India, a constitutional body, has pulled up Indian Railways (IR) for low returns and/or losses incurred in eight public private partnership (PPP) projects taken up to increase connectivity to select ports and industrial belts.

The CAG report, which was tabled in Parliament on July 17, cites deficiencies in selection of private equity partners, wrong assessment of internal rate of return (IRR), loss of revenues, inordinate delay in completion, non-execution of traffic guarantee agreement, among others.

“IR did not adopt the Model Concession Agreement prescribed by the Planning Commission for execution of PPP projects in the infrastructure sector. IR framed the Concession Agreement on trial and error basis, resulting in deficiencies in project management,” the report points out.

The Railways executed eight PPP projects since 2000 through special purpose vehicles (SPVs) and one special purpose company (SPC) in collaboration with private partners.

These include Pipavav Rail Corporation Ltd, Kutch Railway Company Ltd, Haridaspur Paradip Railway Company Ltd, Krishnapatnam Railway Company Ltd and Angul Sukinda Railway Ltd.
The PPP projects were taken up in view of Railways’ declining share of freight and inadequate funds availability.