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Railway station modernisation: Clarity awaited on user development fee

Months after the Railways announced that a notification on the station user charges is in the offing, the wait for the announcement is still on. The announcement is considered important as a quick clarity on the issue is expected to aid the railway station modernisation bidding process that is currently on.

The quantum of the station user fee is important to bring definitiveness on the revenue stream for the station developer.

The projects, where bids are being processed include railway stations in New Delhi, Mumbai (Chhatrapati Shivaji Maharaj Terminus Railway Station), Nagpur, Amritsar and Gwalior, among others.

In February, Railway Board Chairman and CEO Suneet Sharma said the Ministry was discussing the user charges issue with the NITI Aayog. Subsequently, Railway Minister Piyush Goyal had indicated that the issue was under deliberation and various financing models were being considered.

High number of users

Those inviting bids point out that having a user fee (the way it exists for airports and is collected from airline tickets) is important and will provide comfort to lenders and investors, particularly given the high number of station users.

Meanwhile, Ircon International, a bidder eyeing the prime New Delhi station development, maintained that station development fee will not be a large chunk of the project. Station redevelopment will be more of a real estate project, according to SK Chaudhary, CMD, Ircon International.

Railway experts like Subodh Jain, former Member-Engineering, Railway Board, also pointed out that before charging an additional station user charge on tickets, the Railways may need to unbundle (separately reflect) the station user charges and haulage charges in its fare. “The question is don’t the present train fares already include the station user charge (or the terminal fee)? If railways were to implement another user charge on top of the fare, it will amount to an indirect fare increase,” Jain explained to BusinessLine.

Incidentally, in the freight segment of railways, terminal fee is separately indicated.

Annual charge

Earlier, the Railway Ministry had said that user fee will be collected from train users through ticket fare and will accrue for station development. There have been indications that it will be close to ₹30, while the railways has maintained the fee will change annually in sync with some indices (for instance high toll charges are linked to wholesale price index). A small amount per ticket could build into a significant amount if one were to take into account the large number of passengers, going by pre-Covid-19 passenger numbers.

A source from an agency inviting bids said, “User charges are an important component of any infrastructure, including railway station (re)development. Without station user charges, railway station modernisation projects (which are bundled with rights to develop commercial real estate) will be exposed to the real estate market volatility (raising chances of a stressed developer being forced to walk off without completing the project). Having user charges will provide a comfort to the lender in terms of having another steady revenue stream. User charges are important to make the project investor- friendly. More so, when there are a lot of projects to be developed.”

Habibganj railway station (near Bhopal), India’s first railway station to be developed on a public private partnership basis through Indian Railway Station Development Corporation, has been developed without imposing any station user charges.

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