ICRA today said railways station redevelopment will throw open opportunities worth ₹30,000 crore for engineering, procurement, and construction (EPC) firms in the next two years. The agency said the railway ministry is considering 1,318 railway stations for redevelopment under the Amrit Bharat Station Scheme (ABSS).

The shift to EPC model comes as the earlier plan to bid out the station redevelopment project on PPP model could not garner private sector interest.

“Earlier, the government of India (GoI) had envisaged majority of the station redevelopment projects under the public-private-partnership (PPP) mode, which accounted for around 12% for the National Monetisation Pipeline (NMP) target. However, with limited participation in the PPP mode owing to restrictions on pricing, market risk related to real estate development and limited track record of PPP projects in railways, the government reallocated station redevelopment work on the EPC mode in December 2022,” ICRA said. 

Under PPP, the project risk is borne by the private sector, which raises funds and undertakes construction. It eventually earns revenue over the concession period and vests the project back to the government once the period ends. Under EPC, the project is funded fully via government allocation, and the private sector implements the project merely as a contractor.

“To support this, the budgetary allocation increased by more than seven times from ₹2,159 crore in FY 2023 to ₹15,511 crore in FY 2025 Budget Estimates (BE) and is expected to remain at healthy levels in the medium term,” ICRA said.

 “The competition, in traditional segments like roads and buildings, remains elevated and hence the railway station redevelopment provides business opportunities estimated at ₹30,000 crore for construction companies to grow and derisk their businesses through diversification,” said Vinay Kumar G, sector head, Corporate Ratings, ICRA.  

“The station redevelopment project awards witnessed moderate competition in the past two years, reflecting maximum discounts of up to 18% and a median discount of up to 4% and have been similar to other railway EPC projects where the median discount is up to 5%. Indian Railways, being a strong counterparty, the receivable cycle is also expected to remain low and comparable to that of the NHAI,” said Kumar.

“Among the stations being taken up for redevelopment under the ABSS, Uttar Pradesh has the maximum number — 149 stations — followed by Maharashtra (126), West Bengal (94), Gujarat (87), Bihar (86), Rajasthan (82) and Madhya Pradesh (80). Foundation stones have been laid for 553 stations and a total of more than ₹20,000 crore of station redevelopment projects has been awarded till date,” said ICRA.

“Currently, the key awarded stations under the EPC mode include – Mumbai (Chhatrapati Shivaji Maharaj Terminal/CSMT), Ahmedabad, Surat, Prayagraj, Bangalore Cantt, Chennai Egmore and Secunderabad etc. Furthermore, the awards for 765 stations are pending and some of the key stations like New Delhi, Pune, Borivali, Mumbai Central, Thane, Amritsar etc. are yet to be awarded,” it added.