Indian Railways plans six new freight lines under the Hybrid Annuity Model
NEW DELHI: Indian Railways is preparing to implement six new freight corridor projects under the Hybrid Annuity Model, marking the first time the national carrier will use this financing structure for railway infrastructure.
The projects, spanning a total of 647 kilometres, have received clearance from the Public Private Partnership Appraisal Committee of the Ministry of Finance and now await final approval from the Union Cabinet before bids can be invited.
Under the proposed arrangement, private developers will finance 60 per cent of the bid project cost while Indian Railways will contribute the remaining 40 per cent as a grant during the construction phase.
Once the lines become operational, the Railways will repay the private partners’ share through annuity payments that include interest, along with regular payments for maintenance of tracks, stations and other assets.
Critically, the Railways will continue to operate the trains, collect all freight revenue and retain both traffic and tariff risks. This means private concessionaires will not face penalties if freight volumes or earnings fall short of projections.
Project Details and Locations
The six lines carry a combined bid project cost of Rs 15,976 crore. The total capital cost over the proposed concession periods of 17 to 19 years is estimated at Rs 40,866 crore.
Four of the projects are located in Odisha, underscoring the state’s role as a major mineral and industrial freight hub.
These are the 49.58-km Balaram–Putgadia–Tentuloi inner corridor, the 112.56-km Budhapank–Tentuloi–Luburi outer corridor, the 101.26-km Jajpur–Keonjhar Road–Aradi–Dhamara Port link and the 48.96-km Tikiri Station to Waltair Bauxite Mines line.
The remaining two projects are the 207.80-km Manuguru–Ramagundam section in Telangana and the 126.52-km Pakur/Nagarnabi–Godda line in Jharkhand. Coal is expected to be the primary commodity on these routes, supplemented by iron ore, bauxite, coke, chemical manure, cement and food grains.
Shift from Earlier Model
The projects had earlier received in-principle approval under the Design, Build, Finance, Operate and Transfer model. Following market feedback, the Ministry of Railways revised the structure to the Hybrid Annuity Model.
Officials indicated that private investors preferred a more balanced risk-sharing framework in which traffic and revenue uncertainties remained with the public operator rather than being transferred entirely to the private side.
Construction of all six projects is currently proposed to begin in April 2028. Bidding is expected to take place in the financial year 2027-28, after Cabinet clearance and finalisation of the request for proposal documents.
The RFP will set out the minimum tenure of the agreements, the roles of engineering, procurement and construction contractors, and the conditions under which such arrangements will apply.
Wider PPP Pipeline
These six lines form part of a larger effort by Indian Railways to expand private participation in infrastructure development.
According to a senior railway official, 49 additional projects with an estimated combined cost of around Rs 1.80 lakh crore are being prepared for execution under the public-private partnership route.
The Railways has already completed 18 PPP projects valued at Rs 16,686 crore and has seven more projects worth Rs 16,362 crore under implementation, including several focused on coal and port connectivity.
The ministry has recently incorporated the Hybrid Annuity Model and the Development Partner Model into its participative policy framework.
The move reflects an attempt to overcome capital constraints and attract long-term private investment for capacity expansion, particularly on freight corridors that support industrial and logistics growth.
By sharing construction costs while retaining operational control and commercial risk, the Hybrid Annuity Model seeks to make selected freight projects more bankable for private developers without diluting the Railways’ role as the network operator.
If the first set of projects attracts strong bidder interest and progresses smoothly, the structure could serve as a template for a broader range of railway infrastructure works in the years ahead.
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