BACKGROUND
India has the fifth largest railway network in the world which is managed and operated by the
The MOR has now decided to permit private entities to undertake passenger trains operations on select routes in
- introduce modern technology rolling stock;
- reduce transit time;
- improve user experience;
- augment the capacity; and
- reduce supply demand deficit.
The MOR had issued draft bidding documents (i.e., request for qualification (RFQ) and model concession agreement) inviting comments from the stakeholders on these documents. The comments were required to be sent on or before
In this article we have based on our review of documents issued by MOR provided a high-level overview of the key features of MOR's proposal and certain other factors that may be relevant for private players interested in this sector.
SALIENT FEATURES
Operation on IR network - The private passenger trains will be operated on the IR network. In this regard, the MOR has identified 100 origin destination pairs which have been grouped into 12 clusters (each is referred to as a "Project") such that each Project would require about a minimum of 12 trains. Commercial centres, metro cities and tourists' destinations like
Selection of train operators - Open to all and award of concession on the basis of a two-stage international competitive bidding. .
Design, build, finance and operate (DBFO) concession - The selected bidders will be responsible for designing, procurement, building, financing and operation and maintenance of private passenger trains. Each private passenger train will have a minimum of 16 coaches and a maximum number of coaches that does not exceed the longest passenger train operating on the respective path.
Non-discriminatory access to IR- network - MOR will provide non-discriminatory access to private train operators to the IR track and signalling network. MOR will ensure fitness of the IR network for smooth operations of the trains in accordance with the train operation plan.
Market-linked fares - The selected bidder will have the right to determine and collect nondiscriminatory fares from the users.
Other revenue potential - In addition to the non-discriminatory fare from users, the selected bidder could earn revenue from provision of value added/ differentiated customer services including food, beverages, linen, infotainment and generate rental income from use of commercial or other spaces and advertisements on the trains.
Concession and exclusivity period - The concession to operate private passenger trains will be for a period of 35 years. The selected bidder will enjoy an exclusivity period of 3 years during which period no new trains will originate from the originating railway station within 30 minutes before and after the departure of the private passenger train on the said path.
Estimated project cost - The cost of each Project is estimated to be
No sourcing condition - Technology agnostic procurement by the selected bidder i.e., subject to compliance with the IR standards, the selected bidder is free to procure trains either with distributed power or through powerheads. Subject to compliance with the IR standards, the selected bidder is free to procure trains from its own choice of source.
Maximum speed - The private passenger trains will be designed for a maximum permissible speed of 160 kmph.
Prescribed performance parameters - Specified penalties will be recovered from the selected bidders for failure to meet the prescribed performance standards and outcomes.
Payments to MOR - The selected bidder will have to pay to the MOR, the revenue share (i.e., a percentage of gross revenue) as per the offer made in the bid and haulage charges towards terminal, traction energy, transportation, track maintenance and signalling costs.
ELIGIBILITY CONDITIONS
Technical eligibility - The bidder should have paid, received, collected and/ or appropriated a sum of more than
Financial eligibility - The bidder should have: (a) a minimum net worth of
In case of a consortium, the members having at least 26% equity each can collectively satisfy the technical eligibility and the financial eligibility.
WHO IS ELIGIBLE TO PARTICPATE?
The bidding is open to all domestic and foreign entities. The applicant may be a natural person, private entity, government-owned entity or a combination of any of these.
A bidder can be a single entity or a group of up to 6 entities (i.e., consortium) coming together to implement a Project.
The bidder will, if successful, be required to incorporate special purpose vehicle (SPV) in form of a company to execute the concession agreement.
The lead member of the consortium should have at least 26% of the equity in the SPV and each of the members of the consortium whose experience is to be evaluated will have to have at least 26% of the equity in the SPV.
BIDDING PROCESS
Two - Stage Bidding Process
Qualification stage/ RFQ process -The MOR will pre-qualify and shortlist bidders upon compliance with eligibility conditions. The bidder will have to pay the MOR a sum of
Bid stage/ Request for Proposal (RFP) process - The MOR will invite the pre-qualified and shortlisted bidders to participate in the bid/ RFP stage. The bidding documents will be provided to the bidders on payment of
Bid Parameter
The price bids will be evaluated on the basis of premium (i.e., revenue share of gross revenue) offered by the bidder to the MOR. The Project will be awarded to the bidder quoting the highest premium.
Limit of 3 Projects
A bidder can be awarded up to 3 Projects/clusters. However, if a bidder is found to be highest bidder for more than 3 Projects, such bidder will be awarded the 3 Projects with the highest premiums. For the remaining Projects, other bidders will be invited to match the bid submitted by the highest bidder. However, the maximum limit of 3 Projects to a bidder will not apply if it results in non-awarding of any Project.
Bidding process timelines
The MOR intends to complete the entire bidding process within a period of 180 days.
OTHER CONDITIONS
Performance security - The selected bidder will be required to provide a performance security (i.e., an irrevocable and unconditional bank guarantee) for a sum equivalent to
Escrow account - The selected bidder will be required to open an escrow account with a bank before the appointed date to receive the revenues. The nature and flow of funds to and from the escrow account will be in accordance with a separate escrow agreement (to be executed between the selected bidder, the MOR, the lender's representative and the escrow bank).
Commencement of commercial operations - The selected bidder will be required to commence operations on at least 2 paths on the IR network (covered in the Project) within 6 months from the appointed date and the remaining paths on the IR network (covered in the Project) within 1 year from the appointed date.
Restriction on change in control/ shareholding - The consortium members will continue to hold at least 51% equity, and each consortium member (whose experience has been evaluated in the qualification stage/ RFQ process) will continue to hold at least 26% equity (which will, in any event, not be less than 5% of the total project cost specified in the concession agreement), in the SPV for at least a period of 2 years from the date of commercial operations. Further, the SPV will be restricted from, without the MOR's approval, giving effect to (a) change in ownership i.e., acquisition of equity share capital (including by transfer of direct or indirect legal or beneficial ownership or control of any equity shares in the SPV) exceeding 15% of the total equity; and/ or (b) acquisition of control, directly or indirectly, of the board of directors of the SPV.
Additional Thoughts
The selected bidder is required to comply with applicable laws and obtain applicable permits and licenses. However, given that private sector is for the first time being permitted to operate passenger trains in
The
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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