Overview
Indian Railways initially plans to redevelop 400 stations across 100 cities with approximately 2,700 acres of encroachment free land available for commercial development in multiple phases. The program has an outlay of over INR 01 Lakh crore. The successful execution of a program of this scale requires detailed execution roadmap, learning from global and comparable programs, proper organisation and governance structure, new and suitable capabilities, robust analysis and modelling, funding, and continuous interaction with large number of stakeholders.
While the program will continue to evolve and incorporate innovations and feedback, the first set of stations are already in the public domain for bidding. The multiple facets of station development initiative and to lay out the current and potential thinking about this program for all interested participants and stakeholders is detailed under which covers an introduction to the program, learnings from other parts of the world, various modes of station development being deployed by the Indian Railways, program details of the first set of stations available for bidding under PPP (Public Private Partnership) and learning on PPP opportunities, challenges and key imperatives to make this program a successful one.
The highlight of various aspects of Station Redevelopment Program in India is as under:
- Many Railway systems across the world have or are trying to redevelop and transform Railway stations. In addition to the passenger experience, redeveloped stations also contribute to the revenue. Ancillary revenues contribute up to 20 percent of the total revenues in many Railways systems.
- The Indian Railways is taking many paths to achieve the station redevelopment goal. These include a modified form of Swiss challenge model (PPP), PPP through traditional model, collaboration with state governments, G2G arrangement, and collaboration with PSUs, Ministry of Defence (MoD), Ministry of Urban Development (MoUD), other ministries and agencies. Modified Swiss Challenge model is the selected mode for the first set of 23 stations, which have approximately 140 acres of commercial land available and more than 3.3 million footfalls daily. In addition, IRSDC (Indian Railway Station Development Corporation Limited) is redeveloping another 12 stations through traditional PPP and EPC (Engineering Procurement Construction) models.
- PPP programs and the challenges encompassing them have been studied in the past. The Indian Railways is pursuing PPP at a large scale through this program. This report highlights perspectives on making PPP work by highlighting learnings from many programs.
- Successful execution of the station redevelopment program needs well-defined organisation structure, capability building, funding, O&M (Operations and Maintenance) plan, fine-tuned revenues and cost models, policy and phasing of stations proposed under redevelopment.
- Each stakeholder is important in such a program and knowing their point of view can be helpful for right design and successful execution.
Introduction
The Indian Railways is one of the largest railway systems in the world and continues to be one of the main vehicles for the socio-economic development of the country. According to an article by Press Information Bureau of Government of India, a rail system is six times more energy-efficient and four times more economical than a road system. Rail construction costs are approximately six times lower than road construction costs for comparable levels of traffic.
The Indian Railways accounts for approximately one percent of the Gross National Product (GNP) of India and is the backbone of freight needs of the core sector. It also provides six percent of the total employment in the organised sector directly and an additional 2.5 percent indirectly.
The Indian Railways has achieved impressive business in both freight and passenger traffic. However, Indian economy is witnessing many changes like evolving government policies to push for renewable energy, new economic activities requiring shorter and responsive supply chains, and increased development in transportation across various sectors such as aviation, roads and shipping. Massive investments are now required to expand Railway infrastructure and make the Indian Railways a modern transportation vehicle to remain relevant in this changing landscape. Investments are required across all elements, including capacity augmentation, debottlenecking, safety measures and passenger amenities. Capital and capabilities to manage many of these investments and projects are scarce. In this context, projects like redevelopment of Railway stations are unique. They provide an opportunity under PPP that leverages private capital and capabilities and provides good returns to Railways and develop one of their core assets— Railway stations.
Commercial Development of Railway Land: Business Opportunity & Challenges
India has a long history of development of railways. Over the past 180 years, a huge network of rail lines and stations have been developed. Rail networks were brought into the centre of cities, and as a result, the city centres further got intensified and cities spread outward. Over the decades, rail stations emerged as significant urban nodes with commercial developments all around, attracting heavy traffic congestion and strained infrastructure. Even so, these centrally located areas, owing to their intrinsic characteristics, have also become expensive locations. Large tracts of land acquired by the railways in the yesteryears for operational, residential and other purposes have now become prime real estate. Buildings have either become obsolete, derelict or even abandoned. Currently, Indian railways has a portfolio of around 43,000 hectares of land and is perhaps the largest land holder in the country.
Rail Land Redevelopment
The Rail Land Development Authority (RLDA) was set up in 2007 for the development of vacant railway land for commercial use for the purpose of generating revenue by non-tariff measures. Land which is not required for operational purposes in the foreseeable future were identified by the zonal railways and the details advised to the Railway Board. Such plots of land then were handed over to the RLDA by the Railway Board in phases for commercial development. The first batch of 13 sites was entrusted to the RLDA for commercial development by the Ministry of Railways in February 2007. Till date, around 100 plots of land have been entrusted to the RLDA by the ministry. A variety of commercially viable mechanisms, including public-private partnerships, would be employed by the RLDA to get these lands developed on commercial lines so as to generate maximum revenue. While the city gets more built space and old/ outdated properties get redeveloped, the railways would be in a position to increase their internal revenue generation for deployment in other operational areas. A win-win for several stakeholders is envisaged.
Rail Station Redevelopment
While on the one hand, an initiative has been taken to utilise the vacant lands/ redevelop lands where dilapidated buildings exist, the rail stations themselves are also in for a major revamp. The Indian Railway Stations Development Corporation (IRSDC) was set up in 2012 with the objective of developing/ redeveloping the existing/ new railway station(s) including upgrading passenger amenities by new constructions/ renovations and redevelopment of the station buildings, platform surfaces, circulating area, etc, to better standards for serving the need of the passengers. A total of 12 projects have already been initiated up by the IRSDC. An international design competition has also been floated recently for the stations of Gwalior, Nagpur and Bengaluru (Byappanahalli). Further, an ideas competition called SRIJAN (Station Rejuvenation Initiative by Joint Action) for 635 railway stations has also been initiated.
Emerging Challenges
The setting up of RLDA and IRSDC has brought about fresh thinking, innovation and market-driven concepts into the age-old railways. Nevertheless, many challenges persist and need urgent attention.
- Rail Station Heritage: While railway quarters and other buildings surrounding railway stations are either in an abandoned state or dilapidated and ready for redevelopment, many stations themselves are pieces of valuable architectural heritage which merit conservation. In fact, as per the Heritage Inventory of the Indian Railways, there are over 70 buildings/stations of the railways in the heritage category. It is a good idea to modernise the physical infrastructure of the railway stations and provide for more space and better amenities, but at the same time, there is an urgent need to also conserve the heritage buildings and precincts. The challenge is not mere restoration but long-term maintenance of these as also to integrate new buildings and facilities with the old.
- Informal Sector in the Precincts: Almost all railway station precincts are highly crowded, congested and intensely developed. Invariably, the stations attract huge numbers of daily wage labourers, poor migrants, informal sector vendors and a wide variety of transportation modes. Frustrating traffic snarls around railway stations are a common occurrence. Railway stations are generators of huge economic momentum and have many forward and backward economic linkages. Tackling the livelihoods of the poor population living off the railway stations is a major challenge to be addressed. This can neither be simply wished away nor wiped away.
- Surrounding Infrastructure Plug-in: Seamless entry and exit of freight, passengers and a wide variety of vehicles are essential for the success of the functional performance of railway stations. Further, with redevelopment, the surrounding densities are bound to rise manifold. Rail land development/redevelopment, as well as station development/redevelopment, calls for a careful plug-in and integration of people, vehicles, and land uses. In many cases, the conflicts between motorised and non-motorised modes of transport cause a spiral of problems; the mix of buses, taxis, tempos, cars, scooters, rickshaws, carts, cycles and pedestrians all go to create a complex web. Also, integration of the local metro train, the local (suburban) train and the long-distance train is also a challenge. Long-term and short-term parking and drop-offs are also another part of the problem that needs resolution.
- Real estate Industry Issues: For a variety of reasons, the real estate industry in the country has been in the doldrums for a long. The enactment of the Real Estate Regulatory Act and the introduction of the GST regime is yet to bring about the transparency required in operations fully. Added is the high-risk weightage attached to the real estate industry for raising capital. Further, the Railway’s policy to only lease out the property and not to sell out on a freehold ownership basis has its own implications.
- Approval Glitches: The system of approvals for real estate projects in the country is quite a maze. Lack of clarity, delays, going around from pillar to post to various departments, and lack of certainty makes the entire process cumbersome and can easily throw the financials into a quandary. ‘Ease of Doing Business’ has to improve further.
- Market viability beyond Arithmetic: It is good to undertake financial market viability studies and assessments in advance. However, the market reality could always be different as real estate markets are known to be defiant, particularly in recent times. When markets do not respond to the offerings the way they were envisaged, the spiral of delays, overruns and financial upset can take place. Therefore, while the initial arithmetic can be fine, the reality could be risky.
- Personnel Issues: The RLDA and IRSDC initiatives of the Government of India can be seen as bold and disruptive policy departures. The implementation calls for market-savvy commercial approaches and not the conservative and conventional bureaucratic mindset. Running these organisations with conventional railway staff on deputation for a short period would not take them far. Appropriate personnel and compensation packages need to be developed to attract and retain the right kind of technical, financial and managerial drivers to steer the organisations towards their desired goals.
- Towards Smart Urban Rail Nodes, need for Integration: Rail lands and stations are an integral part of the city. There is a strong interdependence and correlation between the city systems and the rail properties. They have historically so far been working mostly in isolation of each other and, therefore, remotely connected. Further, redevelopment has to be seen beyond architecture and urban planning. There is also a need for integration of policies across ministries; railways, urban affairs, tourism, culture, commerce and finance. There is enormous economic potential in the development of smart urban rail nodes which can contribute to employment, civic development, urban aesthetics, municipal health and wealth creation. Therefore, there is an urgent need to integrate policies, institutions, professions and instruments so as to tap this potential for wholesome national development.
Digital Solutions in Station Redevelopment
For smooth passenger flow, different types of traffic simulations can identify potential hotspots of pedestrian congestion at stations. Hence, the effective planning of space including location of retail centers can be done using such simulations enhancing the customer experience. As for safety, data analytics and artificial intelligence can be used to make stations more secure along with integrated security systems.
Digital solutions can also be used to enhance the passenger experience. Currently, most of the digital solutions are limited to travel planning and booking stages. Another important element is to develop sustainable infrastructure. The infrastructure design should adhere to the green building concepts, which imply alternate sources such as solar should be used for power and heating purposes. Energy-efficient lights, waterless urinals and use of biodegradable material are few features of green buildings that can be deployed at stations.
Digital Features
The new digital features used in station redevelopment can be stated as under:
- Station Information & Navigation App for railway stations to get F&B, retail, parking and other station information.
- Integration of digital screens embedded in train windows for work and entertainment.
- Kiosk for ticket booking/status check.
- Digital ticket checking machines.
- Digital platform for onboard food and beverage order.
- Tourist information App.
- Information on connecting public transport.
Summary & Conclusion
One of the most ambitious and visible programs launched by Government of India and Ministry of Railways is redevelopment of Railway stations through PPP model. This would be done by exploiting the commercial development of spare Railways land and ploughing back the surplus for redevelopment of stations. The behemoth station redevelopment plan has an outlay of more than INR 1 lakh crore, offering opportunities to private sector players, both Indian and Foreign, to participate through various public-private partnership modes and to various government agencies. Overall, Indian Railways has more than 8,000 stations, many of which it intends to redevelop to better standards and passenger’s facilities. Currently, the stations are classified into seven categories based on annual earnings from passenger traffic. Of these, around 400 railway stations are classified as A1 and A category stations where passenger earnings are high due to their location in metros, important tourist destinations, and pilgrimage centers. Hence, they are prioritised for redevelopment. The Railway Board has created a database for these 400 stations and has made it available on its website.
Real estate available at Railways stations for one of the stations, is a key asset that the Railways plans to leverage to fund this journey. The 400 Railway stations, across 100 top cities of India, will be offering approximately 2,700 acres of prime encroachment free land for commercial development along with the Railway stations development.
In addition to A1 and A stations, Indian Railways has many other significant station assets. Prime among these stations are those located on commuter routes in metros. Railway stations like Churchgate and Chanakyapuri stations can offer once in a lifetime redevelopment opportunity. While the focus of this report is largely on A1 and A category stations as they have been initiated first in the program, Indian Railways intends to move comprehensively on all other stations through appropriate models.
Station Redevelopment in Multiple Phases
The Indian Railways plans to roll out the redevelopment program for these 400 stations in multiple phases, with 23 stations in the first phase, about 50 stations in the second phase and remaining stations subsequently.
The Indian Railways has set up the Indian Railway Stations Development Corporation Limited (IRSDC) as a specialised agency to anchor some of the redevelopment projects through EPC or PPP mode. The IRSDC is developing 12 stations through Public-Private Partnership (PPP) and through EPC models. The Indian Railways intend to speed up redevelopment projects for the 400 A1 and A category stations and involves multiple agencies, including all Zonal Railways. As announced in Rail Budget 2015-16, the stations will be opened for redevelopment on ‘as is where is’ basis.
Leasing of Land
The Indian Railways intends to lease out spare Railways land for a period of up to 45 years to private entities for commercial development and use the surplus generated to modernise and maintain the railway stations.
This will have dual benefits: New and modern amenities will be provided at railway stations, and world-class infrastructure will be developed in the vicinity of these stations. Some of the amenities envisaged include segregating arriving and departure streams of passengers, surface or basement parking, seamless accessibility for the specially abled, swipe ticket entry machines, well-lit circulating area, clean and modern washrooms, free and paid Wi-Fi options, pharmacy, ATMs, CCTV with integrated security system, medical facilities or standby ambulances, LED lights, ramps for differently abled, tourist information and facilitation center, F&B and entertainment facilities, hotels, lounges and conference facili- ties along with basic amenities.
The Indian Railways is also taking various steps like appointment of nodal officers with dedicated teams in each zone and partner- ships with state governments for expedited clearances to ensure timely and hassle-free implementation of the program. All these steps should encourage the private sector to participate in the program enthusiastically.
Salient Features of Station Redevelopment Program in India
- Encroachment-free land with clear titles
- Hundred percent FDI allowed
- Forty-five years lease period
- Bidding by consortium allowed
- Transparent and objective selection process
Key Elements of Station Redevelopment
- Below mentioned are 12- Key elements of a successful station redevelopment program:
- Safe and secure passenger movement
- Cleanliness and hygiene
- Ease of access to stations
- Customer experience – Holistic customer service, comfort and safety
- Commercialisation – Revenues from NF and RE
- Character of the city – Welcoming gateway to the city
- Digital solution
- Green sustainable infrastructure
- Passenger communication
- Smooth passenger flow
- Individual and organisation capability development
- Stakeholder Management (e.g local authorities)
Conclusion
Indian Railways is going through a transformational change. Some of the major benefits and opportunities related with Station Redevelopment program can be concluded as:
- Investment in stations development need to be undertaken in a planned and integrated manner. This is because it takes time to develop the overall assets.
- Customer interest has to be kept foremost in any design and redevelopment.
- If done well, Railway stations can become an iconic landmark of the city.
- Use of technology is both an imperative and an opportunity.
- PPP is successful for assets which have high commercial viability.
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