Railway projects may derail on CM Siddaramaiah's cost-cutting idea

BANGALORE: As many as 26 railway projects in Karnataka face the threat of being abandoned by the Railways with Chief Minister Siddaramaiah insisting on reworking the agreement with the utility to bring down the state's share in railway projects cost to a third.
Under the terms of the agreement, Karnataka must provide land and also meet half of the project cost, excluding the cost of the land. The chief minister, however, is seeking to include the cost of land in the math. "If the state scales down or withdraws its support, it will make all the on-going projects unviable and we will not be able to proceed at all," a senior Railway official told ET.

This crisis in Railway Minister DV Sadananda Gowda's home state comes at a time when he is urging chief ministers to emulate the Karnataka state model in partnering the railways.

"It is the states that will benefit in a big way. Railway development will lead to tourism development, and the state will get more benefit than the Centre.
So it is only fair that they share the costs," Gowda had told ET on Sunday. BJP's Jagadish Shettar said the state government should honour its agreement.
The on-going projects in Karnataka include doubling of the Ramangaram-Mysore line (93 km), the new lines of HassanBangalore (166 km), KadurChikmagalur-Sakaleshpur (93 km), Tumkur-Raidurga (207 km), Bagalkot-Kudichi (142 km) and Munirabad-Raichur (165 km), Gagag-Wadi (252 km) and Hejjala-Chamarajanagar (140 km) via Kanakapura.



According to officials, the state government wants to rework the agreement as it is stretched for funds for its own welfare schemes. Out of an average annual funding of Rs 710 crore on these 26 projects, the state's share is about Rs 250 crore, and the government has been promptly meeting the obligation for the last few years.

"This year, we have not got a single rupee from the state, but we hope we will get this year's commitment soon," a railway official said. Karnataka has one of the poorest densities of rail network. It is 16.6 km per 1,000 sq km compared with the national average of 18 km. "If we complete all the sanctioned projects, the density will rise to 22 km," the official said.

According to officials, the Railway Board will not take up a project if it is projected to yield below 14 per cent in rate of return on investment. Against this backdrop, all projects undertaken in Karnataka were considered financially unviable, but the railways agreed to take them up after the state offered to bear half the project cost, and provide the land.

"In any project, land cost makes up about 15 per cent of a project's cost, and since Karnataka offered to bear half of a project cost, it took care of 65per cent of costs. The railways had to bear only 35per cent, and it was this partnership that turned the projects viable," the official explained.

Of theRs 22,000 crore needed for completion of the on-going projects,Rs 4,000 crore has already been spent. The railways will requireRs 17,500 crore to complete all the projects with Karnataka's share being . 7,000 crore.

"In any case, at the current rate of average funding of Rs 710 crore per year, it will take 25 years for the on-going projects to complete. But, in reality, the costs are escalating at 7-8 per cent per year, so by the time we actually complete a project, the costs would have gone up four to five times, and the actual expenditure might raise to Rs 70,000 crore, the official explained.

Of the projects under implementation, three -Bangalore-Hassan, Kottur-Harihar and Kadur-Chickmagalur -date back to the mid-90s.