The railway sector has been on a high-growth trajectory for the past few years. While the pace of infrastructure creation has been at an all-time high, new and innovative ways to improve operational efficiency and passenger experience are also being explored. From the implementation of capital-intensive mega projects to the increasing level of digitisation, the sector has been abuzz with activity. In a panel discussion at Infrabuild India, industry experts discussed the status of mega railway projects, their construction experience so far, the impact of Covid-19, the benefits of digital interventions, the factors resulting in project delays, the steps being taken for faster and more cost-effective project execution, and upcoming opportunities. Excerpts…
Raghu Alluri, Managing Director, NCC Infraholdings Limited, and Director, NCC Limited
NCC Infraholdings is primarily working with Rail Vikas Nigam Limited in track doubling, elevated metro, and integrated terminal projects. NCC has also participated in National High Speed Rail Corporation Limited (NHSRCL) and specialised railway bridge projects. Contracting practices have evolved considerably over the years. While most of the railway contracts now are EPC contracts, they are still skewed towards the government. It is important to make contracts more stable so that risks can be shared between the implementing agency and contractors. Also, detailed project reports (DPRs) need to be more realistic so as to decrease the disputes arising from them.
With respect to digitalisation, NCC has started digital tracking of machines and manpower, and accounting and financial systems. The company aims to become fully digitised by 2024.
Rakesh Gaur, President, Railways, Kalpataru Power Transmission
Kalpataru Power Transmission currently has a portfolio of around Rs 50 billion spanning 4,000 rkm. The company is working on track doubling as well as railway electrification projects.
The contracting practices in the railways are heavily loaded towards the employer side. Also, railway contracts in India do not follow the International Federation of Consulting Engineers’ (FIDIC) guidelines. While it is easy for contractors to get time extensions when delays happen for reasons beyond their control, it is still difficult for them to get cost compensation for the extended period. Further, one of the key issues faced in the implementation of railway projects is delays in securing environmental and forest clearances. Identifying the hindrances in advance, ensuring continuous supply of materials and controlling all the resources involved will go a long way in alleviating the issues faced.
R.S. Khurana, Chairman and Managing Director, MRVCL
Mumbai Railway Vikas Corporation Limited (MRVCL) is the nodal agency for the rail component of the Mumbai Urban Transport Project (MUTP). MUTP Phase I was commissioned in 2012, and Phase II is in its last stage. Estimated to entail an investment of Rs 110 billion, MUTP Phase III is currently in progress. MRVCL has also undertaken the implementation of MUTP Phase IIIA at a cost of Rs 340 billion. Planning works are ongoing and construction work is expected to commence soon.
The outbreak of Covid-19 affected project progress in a number of ways. Owing to the mass migration of the workforce and the unavailability of raw material, the pandemic impacted the pace of MUTP projects. It was only after September-October 2020 that the labour force returned to the project sites and construction work started again. However, the silver lining to the Covid episode has been increased digitalisation, which will lead to better efficiency in working.
Overall, most of the projects implemented in Mumbai are brownfield projects. The project authorities have to ensure that ongoing train operations are not halted under any circumstances. Besides, a lot of rehabilitation and resettlement is required for project-affected people. In terms of mode of implementation, MRVCL is implementing projects-on an EPC basis. However, with regard to the choice between EPC and public-private partnership (PPP) contracts, while EPC is a better mode, proper planning is a prerequisite for both.
Vijay Kumar, Director, Rolling Stock, NHSRCL
National High Speed Rail Corporation Limited (NHSRCL) is the nodal agency for implementing the Mumbai-Ahmedabad High-Speed Rail (MAHSR) project, with technical and financial assistance from the Japanese government. Currently, the light detection and ranging survey, the joint management survey, and the preparation of the environmental and social impact assessment reports stand completed. In addition, all the design and technical specifications have been finalised. Of the total land required for the project, about 94 per cent has been acquired in Gujarat and 28 per cent in Maharashtra.
The project has been divided into 25 packages. Of these, work on three packages stands completed. In October 2020, NHSRCL awarded the construction contract for Package C-4 (approximately 237 km) to Larsen & Toubro Limited, at a cost of over Rs 240 billion, the biggest construction contract to be awarded in the country so far. The other investment-intensive contracts coming up involve the construction of a viaduct, track, electrical works, signalling, telecom and steel bridges. Meanwhile, bids for seven more packages have been invited.
NHSRCL has made changes in the technical specifications of the project packages. Earlier, a number of contracts were proposed to be executed by the Japanese contractors. However, keeping in view the importance of technology transfers and the upcoming high-speed rail (HSR) corridors, a number of packages (including track packages) will be constructed by Indian contractors. While the project was expected to be completed by December 2023, NHSRCL is expecting some delays due to the Covid-induced slowdown.
Going forward, the MAHSR corridor offers a plethora of opportunities for contractors with regard to the construction of viaducts, tracks, steel bridges, etc. Besides, a number of items are being indigenously developed, offering abundant opportunities to Indian contractors. Overall, opportunities of Rs 400 billion-Rs 500 billion are being offered under the MAHSR corridor. NHSRCL has already submitted the DPR of the newly announced Delhi-Varanasi HSR corridor to the Railway Board for approval. DPRs for six more corridors are expected to be submitted in the next 15-16 months.
Vivek Bhushan Sood, Chief General Manager, IRSDC
The Indian Railway Stations Development Corporation (IRSDC) is working on the redevelopment of 60 stations across the country. Currently, work on the Habibganj and Gandhinagar stations is in progress. The Habibganj station is being redeveloped on a PPP basis. While progress on both the stations was hampered due to the Covid-19 pandemic, the impact on the Habibganj station was more pronounced, as its implementation is more dependent on market sentiment. Both the stations are expected to be inaugurated before March 2021.
Most of the issues in project execution arise due to the poor quality of DPRs, and mismatches between the data provided in the DPRs and the actual site conditions. Hence, planning a project as per the actual site conditions is of utmost importance.
In terms of mode, the contractor does not have to bear the risk of financing and has no operation and maintenance obligations in the case of EPC projects. Nevertheless, a PPP project can provide a number of benefits if proper risk allocation is done between the private developers and the authority. The efficiencies brought in by the private sector can be harnessed for the creation of public infrastructure through proper structuring of projects.
The Government of India has set a target of awarding around 50 station redevelopment tenders. Of these, five tenders have already been called by IRSDC and further work is going on to call at least 15 more tenders within this financial year. The total value of projects taken up by IRSDC involves an investment of more than Rs 250 billion and the cost of projects for which tenders have already been invited is nearly Rs 50 billion.
Satya Kumar Vuppala, Head, Proposals and Cost Control, Railway Business Group, Larsen & Toubro ECC
L&T’s railway business portfolio spans from mainline to mass transit, including mainline (railways), dedicated freight corridors (DFCs), and dedicated freight links for industries in the power, ports and cement businesses. In the metro/mass transit domain, L&T is present across the entire spectrum of activities including civil, track, traction, S&T and integrated transit systems. It is also executing integrated projects in Dhaka and Mauritius, and has completed a ballast-less track project in Riyadh.
In the DFC business, L&T has been able to achieve a market share of close to 70 per cent across the civil, tracks, electrification and S&T domains in the Western and Eastern corridors. As of today, L&T’s railway business group order book stands at around Rs 150 billion.
With regard to contracting practices, DFCs have radically changed the way railway projects are implemented. They have resulted in a paradigm shift, from bill of quantities contracts to EPC contracts. While EPC contracts have been working quite well, it is also important to follow FIDIC guidelines for railway projects. Further, stringent and diligent pre-qualification criteria covering technical and financial aspects need to be placed to ensure that there is a level playing field between bidders. Project management consultants should be empowered and updated in global practices.
The key issues faced in the sector include unrealistic tender estimates, skewed risk allocation, inviting tenders before the completion of prerequisite activities, non-inclusion of pre-bid query responses and rigid payment milestones. Visualising the project in advance, withstanding client pressure, understanding the need and timing for scaling up and outsourcing resources, effective project planning and project management techniques, and proper management of sub-contractors are some of requirements for successful project execution. We recommend that railways invite more large EPC packages with internationally accepted FIDIC contract conditions, stringent and diligent pre-qualification criteria covering technical and financial aspects with realistic tender estimates.
What lies ahead
The railway sector has proven to be a key contributor in India’s response to the Covid-19 crisis. It played a critical role in addressing supply chain challenges during the lockdown, when other modes of transport came to a halt. While the first quarter of 2020-21 was impacted the most by the pandemic, construction activities have almost returned to pre-Covid levels from the third quarter onwards.
Thus, even in the wake of the Covid-19 outbreak, the sector is expected to witness increased investments. Going ahead, the key steps that can be taken to fast-track the execution of projects include fixing target-based project timelines, pushing for more indigenous development, providing single-window clearances, incentivising contractors for completing work before the scheduled timelines, bringing all stakeholders on board, and developing a central project monitoring committee, among others.