Date:12/10/2006 URL: http://www.thehindubusinessline.com/2006/10/12/stories/2006101204000900.htm

Back Shareholders' pact signed for rail SPV

Our Bureau

New Delhi , Oct 11

Haridaspur-Paradip Railway Company Ltd, the SPV that would build the 82-km rail link in Orissa to shorten the distance between the iron ore mines in Keonjhar area and Paradip Port, became operational on Thursday with the signing of shareholders' agreement.

The company was formed through equity contribution from nine partners — Rail Vikas Nigam Ltd, Government of Orissa, Paradip Port Trust, Essel Mining Industries Ltd, Rungta Mines, Jindal Steel and Power, MSPL Ltd, SAIL and POSCO India Pvt Ltd. Together, they have put in a total equity of Rs 275 crore.

The project cost is about Rs 456 crore, but with cost of financing and escalation on account of construction, the landed cost is expected to be Rs 598 crore, official sources said. Apart from the equity of Rs 275 crore, additional funds would be raised through debt.

Direct link

The company will provide a direct rail link between Banaspani, Keonjhar mining area and Paradip Port, and this will be 41 km shorter than the existing route (via Cuttack). "The distance would be down to about 320 km instead of 360 km," said sources.

RVNL has the largest equity stake in the SPV (48 per cent), while Essel Mining and Rungta Mines have 11 per cent each, and POSCO and Paradip Port have ten per cent each. The remaining ten per cent stake is held by MSPL Ltd, SAIL, Jindal Steel and Power, and Government of Orissa.

The rail link will eventually support 30-tonne axle load trains. It would form part of a heavy mineral loading rail network in Orissa and Jharkhand, apart from having a feeder route to the dedicated rail freight corridor.

Assured revenue

The rail link is expected to support inward movement of 10 million tonnes (mt) of imported coking coal per annum. Based on the present market, it would help move 10 million tonnes of iron ore for exports to Paradip Port.

All the six user companies — steel and mining companies — have given traffic guarantees for the rail link. That is, they will pay revenues for moving the guaranteed volume of traffic in a year irrespective of whether they move that amount of freight or not. "This has ensured an assured level of revenue flow for the company," said sources.

The traffic guarantees provided by each of the company varies from 0.5 mt to 6 mt (guaranteed by POSCO). The line is likely to be commissioned in 2008-09.