The Hindu Business Line : Rothschild for `pvt capital flow' into railways

Investment banking firm Rothschild feels the Government has to work out ways to capture the economic benefits from the new rail freight line and plough them back into the Railway network. The firm's Indian arm is also looking to raise capital for road projects.

Investment banking firm Rothschild's Vice-Chairman, Mr Simon Linnett, with experience in various transportation projects including the UK Rail privatisation process, was cautious while conveying his thoughts on the ownership pattern of the dedicated rail freight corridor in India.

While he did say that private capital should flow into the sector, he also felt that it would be best to keep the entire rail system — the present network and the new freight line network — within an integrated organisation.

Speaking broadly on the Railways' proposed freight corridor, he said: "How the freight line should be owned depends on the long-term thinking of the Government, on whether the Railways system has a social objective."

PRIVATE OWNERSHIP

If the Government plans to keep Indian Railways as a tight, Ministry-controlled network in the long term, it would be better to let the freight line be run by private firms. But the traffic from the present Indian Railways line would definitely shift to the newer line, making the present system more difficult to run, he admitted.

In this option, the Government has to work out ways to capture the total economic benefits emerging out of the new line and plough them back into the Railway network. Private sector runs business much better than the Government, he said.

This option might be neutral for the Union Government, as the customers would be benefited, Government funds do not need to be put in and the Railways can transfer benefits from the new system to the older system. However, from a Railway Ministry perspective, it would be an undesirable move as it is likely to be left with unprofitable operations.

And in the Railways, the rail-wheel balance is very important and competing, interoperable systems have to be very carefully handled, admitted Mr Linnett.

DESIRABLE OPTION

The best option, he felt, was to keep the entire network within one integrated organisation and simultaneously introduce private capital into the system.

"The Railways could be corporatised by allowing people to invest in equity or quasi-equity," Mr Linnett said. In such a move, when the private sector comes in, the wishes of Centre Union Government would not be too difficult to handle. Thus, even from a Railways perspective this would be a good move, he felt.

Meanwhile, Mr Sanjay Bhandarkar, Managing Director, Rothschild (India), said that in the roads sector, his firm would focus on raising capital — debt and equity — for holding companies that have a large exposure in road projects. In the ports sector, the firm is closely examining the JN Port fourth terminal bid. "We hope to be involved with one of the bidding consortiums," he said.