PPP lease off the table, K-RIDE to buy trains for Bengaluru suburban rail

The state is exploring equity funding in collaboration with the railways to procure the coaches, Infrastructure Development Minister MB Patil told DH.

Bengaluru: Karnataka is likely to purchase rather than lease metro-like, air-conditioned trains for the Bengaluru Suburban Railway Project (BSRP) at a cost of Rs 4,270.30 crore.

The state is exploring equity funding in collaboration with the railways to procure the coaches, according to Infrastructure Development Minister MB Patil.

This decision comes after none of the three eligible companies submitted financial bids for leasing 306 coaches to the project for 35 years under a public-private partnership (PPP).

Railway Infrastructure Development Company (Karnataka), or K-RIDE, the government agency implementing the project, aims to leverage Bengaluru’s expansive railway infrastructure to provide suburban train services over a 149-km network.

It was Niti Aayog that proposed leasing coaches for the BSRP, a joint venture between the Karnataka government and the railways. However, this approach proved challenging.

K-RIDE appointed RITES (Rail India Technical and Economic Service) as the transaction advisor for the procurement, maintenance and operation of 306 coaches for 35 years on a PPP mode. Based on the RITES' recommendation, the agency floated tenders inviting technical bids (Request for Qualification) on June 8, 2023.

Three companies — Indian PSUs BEML, BHEL, and Spanish rolling stock manufacturer CAF India Pvt Ltd — qualified after K-RIDE opened tenders in July 2023.

On December 29, 2023, K-RIDE invited financial bids and extended the deadline three times (May 27, June 12 and July 11 this year) at the bidders' request but did not receive any response. It floated another tender on August 12 this year but again received no responses by the August 22 deadline.

A senior K-RIDE official, speaking on the condition of anonymity, explained that companies were hesitant to make large investments with low immediate returns.

The PPP model has not been successful anywhere in India. Secondly, neither the state nor the railways was willing to provide a sovereign bank guarantee to the train manufacturer to cover costs if the project did not generate sufficient revenue.

"Rolling stock manufacturers wanted a sovereign guarantee to ensure payments even if the BSRP didn’t generate enough revenue (from passenger operations). However, the railways does not have such a policy, so the companies backed out," the official said.

With the leasing option off the table, K-RIDE initially considered procuring Vande Metro coaches but has now decided to directly purchase the trains instead. It has sent a draft proposal to the Infrastructure Development Department, officials said.

Patil, the minister, told DH: "The coach procurement on a PPP basis was a unique idea proposed by Niti Aayog but it hasn't been implemented anywhere in India. Since we did not receive any bids, we will now explore equity funding, with costs shared 50:50 between the government of Karnataka and the railways."

The state government and the railways will each contribute Rs 2,135.15 crore to buy the 306 coaches. The proposal will be discussed at the August 31 meeting of the K-RIDE board, according to another senior official.

"If the K-RIDE board approves, the proposal will require clearance from the state cabinet. After cabinet approval, it will be sent to the railway board," the official explained, also speaking anonymously. "We are hopeful that the railway board will also approve it."

Under para 11.1 of the MoU signed between the government of Karnataka, the Ministry of Railways and K-RIDE on November 15, 2023, the state and the railways will have to contribute Rs 2,315.15 crore each for the train procurement over five years. Train maintenance will be borne by KRIDE from its earnings, as per the MOU.

The BSRP, estimated to cost Rs 15,767 crore, would get 60% of its funding from the German investment bank KfW (€500 million) and the European Investment Bank (€300 million). As per the “condition precedent” for fund disbursement in the loan agreements signed with both entities, K-RIDE has to provide them with a copy of the executed agreement for the procurement of rolling stock by September 2025, a third K-RIDE official said.

Once the state approves the train purchase proposal, it will be sent to the Railway Board/Cabinet Committee on Economic Affairs for sanction. The matter is also likely to be discussed with a NITI Aayog team that will visit Bengaluru shortly, the official added.

If all approvals are secured by December, tenders could be invited and finalised by March 2025. The prototype train is expected to be delivered within two years, in time for the opening of the Mallige Line (Benniganahalli-Chikkabanavara, 25.57 km). After that, 60 coaches will be delivered annually, the second official added.

K-RIDE will need a small number of coaches to start skeleton train services every 10-12 minutes. The trains will begin with a three-coach configuration and will be expanded in multiples of three based on demand, the first official noted.

K-RIDE will have a total of four corridors (Sampige, Mallige, Parijata and Kanaka). Presently, groundwork is underway on the Mallige and Kanaka lines while K-RIDE has invited tenders for viaduct and station construction of the first phase of the Mallige Line (Majestic-Devanahalli, with a branch line to the airport, 41.4 km). Tenders for the second phase of the Mallige Line are expected to be called in the next few weeks. Afterwards, tenders will be invited for the construction of the Parijata Line (Kengeri-Whitefield, 35.52 km).

The deadline for the entire suburban railway project is December 2027.