State to ink pact with Railways on Sept. 1

Move to implement rail projects on cost-sharing basis

The State and the Railways will sign an agreement on September 1 to set up a joint venture (JV) company to execute commercially viable railway projects on a cost-sharing basis.

The JV agreement will be signed by Secretary, Transport, and an official of the Railway Board in New Delhi for “development of rail infrastructure for critical connectivity and capacity enhancement,” official sources told The Hindu .

A Cabinet meeting on August 3 had given the nod for the formation of the Joint Venture Company (JVC) following clearance given by the departments of Law and Finance to the shareholders’ agreement forwarded by Railways.

The MOU to set up the JVC to undertake project development, financing and implementing rail projects on a 51:49 equity share between the State and the Railways was signed in Delhi on January 27.

The Articles of Association and Memorandum of Association need to be formed and filed with the Registrar of Companies to form the company. The name of the JVC will be finalised only after securing the nod of the Registrar of Companies.

The JVC will undertake the viable projects by itself or through subsidiary (Project SPV), including those with Viability Gap Funding (VGF). The projects need to have an Internal Rate of Return of not less than 12 per cent.

The JVC will have an authorised share capital of Rs.100 crore with initial paid-up capital of Rs.100 crore. The headquarters of the JVC will be in Thiruvananthapuram.

Besides the part-time Chairman to be nominated by State, the JVC will have a Managing Director, 2 directors and six part-time directors. The State and Railways will have two part-time directors each. Two part-time independent expert directors will be drawn from the private sector, public sector units and educational institutions,

Once the project gets the nod, a concession agreement has to be signed between the project SPV and the Railways for 30 years. The railways will provide last mile connectivity to the projects.

As many as eight projects, including the Rapid Rail Transit System (RRTS), rail coach factory at Kanjikode, and the Sabari Rail have been identified for execution through cost-sharing.