Ministry of Railways to monetise redeveloped stations through REITs

With a massive asset pipeline to monetise in 2022-23, the Ministry of Railways is setting the wheels in motion to put redeveloped stations up for grabs through Real Estate Investment Trusts (REITs). While the target this year is close to Rs 30,000 crore, the ministry is likely to offer assets in smaller tranches, Business Standard has learnt. 

The decision assumes significance as MoR has been lagging behind in achieving its targets under the National Monetisation Pipeline (NMP) of the Centre, during the last fiscal year. The Railways alone is responsible for achieving a fourth of the ambitious Rs 6-trillion estimated proceeds from the NMP by 2024-25.

However, the ministry will approach the REIT mode differently from what was initially stipulated under the NMP. “There is a definite plan and it is also one of the options the ministry was initially told to explore by NITI Aayog, but there is little headway in it as deliberations are going on. The current line of thought is that the ministry should conduct the redevelopment in engineering, procurement, and construction (EPC) mode instead of public private partnership (PPP), and then monetise when the assets will be complete and their valuation will be higher,” a senior government official said.

Officials said unlike other railway assets, stations are the most akin to conventional infrastructure and would not be as complex to monetise, given that there is successful PPP precedence in properties like airports. The ministry may target this lowest-hanging fruit first once the structure of its proposed REITs is approved, said the official.

Another official in the know said an abstract structure has been created and is being worked upon further, under which a REIT can be created for commercially viable stations redeveloped under the EPC mode with returns based on passenger services fees, platform fees, a proposed railway redevelopment fees, and other land and fixed assets that can be used to generate revenue.

The erstwhile plan was to initiate the monetisation of some tier-1 marquee stations through development under PPP right from the beginning, under the design, build, finance, operate, and transfer (DBFOT) model. According to NITI Aayog, the ministry was supposed to monetise 40 stations last fiscal year, followed by 120 stations each in the following years up to 2024-25.

Business Standard had previously reported that the ministry had set aside Rs 30,000 crore for the world-class redevelopment of 75 stations this fiscal year.

Railway stations are being redeveloped under three main modes: conventional, under which railways itself develops the stations through its implementing agencies; EPC, under which railways pays private contractors; and PPP, based on revenue-sharing concession agreements.

While most of the 1,253 stations identified under the Adarsh station scheme by the railways have been developed under the conventional and EPC mode, stations such as Vijayawada, Anand Vihar, Vadodara, Kalyan, Pune, Dadar, Chennai Central, and Coimbatore are being developed under PPP.