: The Joint Venture Company (JVC) to be formed between the State and the Railways to take up rail projects on cost-sharing basis needs to incorporate project-specific subsidiaries (project special purpose vehicles/project SPVs) to execute the “prioritised viable” projects.
The joint venture agreement, approved by the Cabinet and to be inked between the State and the Railways, says Project SPVs will be incorporated as limited liability company.
The initial equity will be contributed by the JVC that will have an equity partnership of 51:49 between the State and Railways. The Railways and the State will infuse equity in the Project SPVs only through the JVC and not directly.
The Project SPVs may, on need basis and on specific projects, permit equity participation of banks, public sector undertakings, ports and mines with the consent of the parties.
However the equity holding of the JVC in the Project SPVs at all times will be at least 26 per cent of the equity share capital of Project SPVs.
The projects “economically feasible and financially viable” by the Board and or projects with Viability Gap Funding (VGF) will only be taken up by JVC, a copy of the approved agreement available with The Hindu says.
Thus, the eight projects, including the Rapid Rail Transit System, Rail coach factory at Kanjikode, Sabari Rail, the 156-km Nilambur-Nanjengud line, will need separate Project SPVs.
Once a project gets the nod, a concession agreement has to be signed between railways and the Project SPV. The concession period is for 30 years from the date of execution of the pact. The land acquisition will have to be taken up by the State. However, the Board and the Project SPV can consider other options.
The implementation, including operations and maintenance of the projects, will be undertaken by the concerned zonal railway or any other agency as decided by Project SPV in consultation with railways. The entire debt of the project will have to be serviced by Project SPV and will have to bear the financial losses.
At the end of the 30-year concession agreement or termination of the pact, Railways will have the option to acquire the assets of the relevant project excluding the land at a nominal price of Re 1. The land will be transferred to the railways at the original acquisition cost.
