The Railways plan to invite the private sector to build fixed assets on build-operate-transfer (BOT) basis. The BOT scheme has been approved by the Ministry of Law and awaits a formal approval from the Railway Board. Within two months, the Railways plan to invite tenders on BOT basis for three projects.

The three projects for which tenders will be invited on BOT basis are gauge conversion of the Virmagam-Mehsana section in Gujarat, Utratia Chandroli-Sultanpur Bandhua Kalan doubling in Uttar Pradesh and the Kalpurigram-Siho doubling work in the north east.

The proposed BOT scheme envisages private participation through a consortium of construction contractors and financiers. Contracts under the BOT scheme would be awarded through a two-stage bidding process and selection would be based on the lowest access charges quoted by the pre-qualified tenderers. The assets would be owned by the concessionaire during the concession period and the access charges paid by the Railways for use of the asset after its construction and commissioning, will go into an escrow account.

Initially, the scheme will be used for small projects and later extended to bigger projects depending on the response from the private sector. However, only projects with a 16 per cent or above internal rate of return will be brought under this scheme.

Earlier, the Railways had tried to attract private participation in building assets through build-operate-lease-transfer basis. However, the scheme had failed mainly due to lack of interest by funding agencies.