Rail Vikas Nigam Limited

Vallarpadam Idappally (New Line) Project

Final Report
Volume 1: Technical & Market Review
July 2004
IDFC
BARSYL
Infrastructure Development Finance
Railroad Systems Ltd.

Balaji

Company Limited,
HOUSE,

BARSYL

3rd Floor,ITC Centre,

Sarvasukhi Colony,

33

760 Anna Salai,

Marredpally,

West

Chennai 600 002

Secunderabad 50

CONTENTS
1

BACKGROUND
1
1.1

Project Assignment

1.2

Scope of Work

STUDY METHODOLOGY

4
2.1

Ascertaining the reasonableness of the project cost estimates

2.2

Assessment of cargo/ passenger traffic

2.3

Review of the O&M arrangements proposed for the Project

2.4

Review the adequacy of associated infrastructure

2.5

Assess the need for appropriate disaster/ contingency plan

4
4
5
5
5
2.6 PART B Feasibility Study and Finalization of Project
Implimentation
Structure& Financial Plan

3
6

PROJECT BACKGROUND
3.1

Project Rationale

3.2

Project Location

3.3

Salient Project Parameters

3.4

Project Cost as per PETS Report

6
7
8
9

4
10

TECHNICAL REVIEW
4.1

Methodology

10
4.2

Quantity and Cost Review Civil

11
4.3

Signalling & Telecommunication

4.4

Electrical & OHE

4.5

Revised cost estimate for the project (Firm Cost)

4.6

Estimates of non-firm costs

4.7

Total Project Cost Estimate (Firm and Non-Firm Cost)

16
17
17
18
19

5
20

TRAFFIC REVIEW

5.1

Key Meetings and discussions

5.2

Development of ICTT at Vallarpadom

20
20
5.3

Traffic Projections in the preliminary Engineering-cum-Traffic

Study
(PETS) Report FRH Study
23
5.4

Traffic Projections Current Review

5.5

Comparison with CES Study Cochin Port Projection Of Sep

34

5.6

Dubai Port Internationals Traffic Projectoin

5.7

Conclusions On Traffic

5.8

Projected Rail Traffic

28
2003
35
35
37

6
HANDLING CAPACITY FOR PROJECTED
THROUGHOUT
39
7
41

OPERATION & MAINTENANCE

7.1

Vallarpadam yard

7.2

Other Requirements

7.3

O&M Fully Recovered Costs Basis

7.4

Operating Costs For Assumptions

41
41
42
43

7.5

O&M Costs For Vallarpadom Idappally Line

47
7.6

Fully Distributed Costs

49

8
52

MISCELLANEOUS

9
53

IMPLIMENTATION SHEDULE

10
54

CONCLUSION

11
55

LIST OF ANNEXURES

1 BACKGROUND

1.1 Project Assignment

Vallarpadam Idappally New Line project is a portconnectivity project being assessed by Rail Vikas Nigam
Limited (RVNL) for possible implementation under the
National Rail Vikas Yojana.
RVNL (further referred to as the Client) has commissioned
Infrastructure Development Finance Company (IDFC) in
association with BARSYL (further referred to as the
Consultants) for reviewing financial viability and
bankability of the proposed new BG rail line from Idappally
(near Ernakulam) to the proposed International Container
Transshipment Terminal (ICTT) at Vallarpadam. The scope
of Consultants work and the major tasks that have been
carried out for the purpose of study are outlined in the
following section.

1.2 Scope of Work

1.2.1 PART A Technical Marketing Study

The Consultants were to review the designs, procurement,

and construction program and assess the reasonableness
of the cost estimates made by Indian Railways, as part of
the preliminary technical study for the Projects. The scope
of study included:
1) Ascertaining the reasonableness of the project cost
estimates.
i) Commenting on the methodology of cost estimation
of different
elements of the
project
ii) Identifying firm and non-firm costs and the likely
variation in these
iii) Identifying any uncovered or under estimated cost
and likely estimates for the same
iv) Determining contingency provision or assessing
the adequacy of
the contingency provision
v) Assessing the reasonableness of the project cost
and where
possible comparing the same with similar projects
executed
domestically
vi) Reviewing the procurement and construction
programme
vii) Suggest possible reductions in project cost
2) Assessment of cargo / passenger traffic.
i)
Broad analysis of past cargo and passenger traffic
trends in the region including trends in cargo and
passenger profile
ii)
Independent assessment of the potential market
for the project in terms of cargo / passenger
profile, projected growth rates, likely market share
vis--vis competing faculties in the region
iii) Interviews with some select large users to elicit
responses on expectations of service levels and

iv)

v)

suitability of the project to meet their

requirements
Assessment of the hinterland connectivity through
port (if any) and road linkages and adequacy of
the same to meet the projected throughput levels
Assessment of the total cargo / passenger
handling capacity of the existing infrastructure and
recommend additionalties, if required, to meet the
throughput projections

3) Review of the O&M arrangements proposed for the

Projects
4) Review of adequacy and reasonableness of all
associated infrastructure and other support
arrangements necessary for the Projects
5) Assess the need for appropriate disaster / contingency
plan for the Projects to manage the risks identified
1.2.2 PART B - Feasibility Study and Finalization of
Project Implimentation
Structure & Financial plan
The consultants were to carry out a feasibility study to
establish the financial viability of the Project to enable its
functioning as independent,
commercially viable entity to be implemented either
through BOT, SPV or any other project structure & its
associated financing mechanism. Specifically , the
Consultant would:
(a)
Undertake a detailed financial analysis based
on the findings of

Part A of the study (overall cost and revenue

estimation).
(b)
Recommended appropriate financing mix for
each of the projects
(c)
Study and evaluate alternate project
structure and
recommended the preferred implementation
structure based on
project economics

STUDY METHODOLOGY

The technical and marketing study entailed review of the

project reports
furnished by the Client, supplemented by discussions with
the concerned
Zonal Railways, selected users, and other stakeholders.
Methodology

adopted by the Consultants for accomplishing various

tasks constituting
the scope of work is briefly described in this chapter.
2.1
Ascertaining the reasonableness of the project cost
estimates
The Consultants reviewed the project designs and the
methodology
underlying the project estimates provided by the Client.
Furthur, the
project cost estimates were subjected to systematic
scrutiny to identify
firm and non-firm costs and the likely variation in
these.Based on the
review , an assessment has been made of the
reasonableness of the
estimates as well as adequacy of contingency provision to
meet the
implementation schedule.Suggestions have also been
made where
possible with regard to possible reduction in project cost
by adopting
modern project management practices.
2.2

Assessment of cargo/passenger traffic

The Consultants have assessed the reasonableness of the

level and
composition of the traffic estimates contained in the
project reports.

The traffic forecasts have been moderated/updated to

reflect the
potential market for the project on the basis of
consultations with
and/or information gathered from zonal railways and
major rail users.
2.2.1

Assessment of the handling capacity

The Consultants have made an assessment of the

adequacy of the planned
facilities to handle the increased traffic, based on the
projected level of
throughput on the project railway.
2.3

Review of the O&M arrangements proposed for the Project

The Consultants have reviewed the proposed O&M

arrangements for
correctness of charges for different elements of O&M
costs as specified by
Railways. Furthur, Operations & Maintenance cost based
on prudent
norms has been used to determine the realistic O&M
expenses in case the
implementation structure requires O&M to be done by the
Railway under
a contract.
2.4

Review the adequacy of associated infrastructure

During a site visit to the project railway line, the

Consultants have made a
First hand assessment of land requirement, availability
and access to land
Through road and other means of transport, availability of
power, water
And fuel. Based on this, the criticality of the above and
possible impact of
Their non-availability/delayed availability on the project
has been
assessed.
2.5

Assess the need for appropriate disaster/contingency plan

Any construction risks identified during the course of the

review and site
Visits have been suggested.
2.6
PART B - Feasibility Study and Finalization of Project
Implementation
Structure & Financial Plan
Based on the project cost, traffic and revenue data, the
Consultant
Developed a financial model to assess the viability of the
project.The
Model is based on a Financial Institution format for
appraisal, and uses
Proprietary programs for the assessment of the projects
financials on

a probabilistic basis. Based on this feasibility model, the

proposed
Structure of the project is recommended.

PROJECT BACKGROUND
3.1

Project Rationale

Indian Ports are currently not geared for handling large container
ships of 6000 TEU, and are therefore serviced by feeder ships
being transshipped from major regional Ports such as Colombo,
Singapore, Dubai. Colombo acts as a transshipment hub for about
70% of the Indian container traffic. In the current port capacity

scenario, various ports in India are attempting to undergo major

expansion in container handling capacity, as well as to directly
handle large container ships.

Cochin port region also has the potential to develop as a hub

port in the Indian context, being the only major port in India, that
enjoys the geo-strategic advantage of being located closest
(under 20 Nautical Miles) to maritime route connecting Far East
and Australia with Europe. Prime Minister of India had expressed
the commitment in January 2001 for establishing an International
Container Terminal at Cochin.

In this scenario, the Cochin Port Trust (CPT) has identified

Vallarpadam1, an island adjacent to the Cochin Port, as the
prospective location for the proposed ICTT. The CPT has decided
on this location on the basis of land availability of about 5Sq. Km.
and with the scope to reclaim another 4 Sq. Km. Cochin port Trust
has also taken up the work of connecting Vallarpadam with main
land by a road. National Highways Authority of India (NHAI) has
prepared a project report to provide a road connection, which will
pass through the outskirts of the city area and link NH17 and
NH47.The proposed road will also be connecting NH49 through
NH17 / NH47.

Cochin Port Trust had thus approached Southern Railway for rail
connectivity to Vallarpadam. Southern Railway has prepared the
Preliminary Engineering cum Traffic Survey (PETS) Report for a
new railway line from Vallarpadam to Idappalli along with
updating the PETS Report for a new BG line from Idappalli to
Guruvayur, to enhance mainline capacity to handle the additional
traffic that the Port expansion would generate.

Environmental and Flying funnel clearance have also been

obtained by CPT.In addition to the above, CPT has taken the
initiative to get in principle approval to declare Vallarpadam
area as a Port Based Special Economic Zone (PBSEZ) to facilitate
tax concessions and fast track clearance to the prospective
investors

3.2

Project Location

The proposed line lies in Ernakulam District of Kerala state. The

proposed line will be parallel to the existing line from Idappalli
Station up to Ernakulam Goods Station in the approximate EastWest direction.

The proposed rail line will be connecting the proposed ICTT at

Vallarpadam with Idappalli Railway station.The alignment
traverses from 5.49 m above Mean Sea Level (MSL) at Idappalli
Railway Station and rises to a maximum of 13.0 m above MSL at
National waterway No. 3 at Km 6.7 and reaches Vallarpadam at
+3.0 m above MSL. There is no important river crossing upto
Ernakulam goods station and the alignment crosses National
waterway No. 3 between main land and Vallarpadam.

Additional details on the Proposed Port expansion project are given in the section
on Market Study.

3.3

Salient Project Parameters

The following parameters are to be adopted for works to be

adopted for works to be carried out for the proposed project.

3.4

Length 8.5 Km.

Gauge 1676 mm Broad Gauge Main Line Standard
Number of tracks Single
Maximum Speed 100 Kmph
Type of Signaling System MACL Signals of Standard III
Traction System Electric, 25 KV AC Traction
Number of Bridges / Tunnels 8 Bridges, No tunnels.
Construction of new major bridge from Ernakulam goods
to Vallarpadam across National Waterway No. 3
Number of other major technical works 4 level
crossings
Ruling Gradient 1 in 100
Maximum degree of curvature -6 degree
Width of formation in Bank 6.85 m
Side slope 1 : 2
The power lines and telegraph lines shall be shifted to
accommodate BG line wherever required for
electrification of 25 KV AC
THER IS NO IMPROVEMENT REQUIRED TO STATION
BUILDING AT Idappalli. Minimum staff quarters are
proposed at Idappalli.
One cabin is proposed at Vallarpadam to function as
station building.

Project cost as per PETS Report

The project cost for developing the 8.5 km new line

between the proposed ICTT at Vallarpadam and Idappali is
estimated at Rs. 83.03 crores as per the PETS Report. The
abstract of this estimate I provided in the following table:

Sl.N
o.

Item

Amount(Rs.
Crores)
Total

Net of
CRRM2

1.

Civil Engineering

77.51

78.09

2.

Signaling & Telecom

1.95

1.95

3.

Electrical & OHE

3.57

3.57

Total

83.03

83.61

The Consultant has undertaken a broad review of designs

provided in the PETS Report, to identify any major design issues
that can affect quantities and costs. The comparative quantities
have been evaluated on the basis of this review.

Credit for returned material

4 TECHNICAL REVIEW
The Technical review of the project has been carried out based on
the Preliminary Engineering cum Traffic Survey (PETS) Report of
Southern Railway, dated September 2003, furnished by RVNL for
the purpose of ascertaining the reasonableness of the project cost
estimates and also to update the project cost estimates to the
prevailing rates.

4.1

Methodology

The methodology adopted for undertaking the Technical

review for the
Project is outlined as given below:
The details provided in the PETS Report have been
verified / validated by
site visits followed by discussions with key officials of
Railways, Cochin Port Trust, etc.
The review of quantities and costs has been carried out
based on the following assumptions / basis;
As the detailed description of the quantities is not
given in the PETS Report, the review of quantities has
been carried out on the basis of proposed length of
the track.
Local enquires have been carried out during the site
visits for ascertaining the land cost.
The market rates of railway works carried out recently
within the project influence area have been
considered for the purpose of comparing the rates
given in the PETS Report for the project

 For permanent way items, the rates have been

updated based on 2003-04 rates as per Railway Board
Circular Number 2000/ CE II/ MPW / 1, dated 22-0403. A copy of the circular is placed in Annexure I
Construction cost of bridges has also been compared
with the similar works carried out in the project area.
4.2

Quantity and Cost Review Civil

As per the PETS Report, the total cost of civil engineering

work for the
project is estimated at Rs. 77.51 Crores.The major
components of civil
engineering works comprise of land , bridges and
permanent way.The
detailed break-up of the various components of civil
engineering works of
the project is shown in the table below:

Sl.
No.
1
2
3
4
5
6
7
8

Item
Preliminary
Expenses
Land
Formation
Permanent Way
Bridges
Stations and
Buildings
Equipment, Plan &
Machinery
General Charges
Total

Total
% of Total
(Rs. Crores)
0.03
0.04%
25.97
1.63
6.57
38.58
0.37

33.50%
2.10%
8.47%
49.77%
0.48%

0.01

0.01%

4.36
77.51

5.62%
100/00%

The review of the major components of civil engineering works for

the project is detailed in the subsequent sections.
4.2.1 Land
As per the PETE Report, the basic land value has been
taken as Rs. 247 Lakhs
per hectare. The total area of land to be acquired for
project area has been
taken as 5 hectares.The total land cost including
compensation for
buildings, wells, solatium for compulsory acquisition at
30%, advertisement
charges etc. amounts to Rs.25.97 crores.

As per the Consultants review, the extent of proposed land

acquisition is
reasonable for the 8.5 km running track length. The land
rate taken in the
PETS Report has been reviewed by way of local enquiries,
and found to be in
order.The reason for such high rates is due to the alignment
passing
the fully developed areas of Cochin and Ernakulam, where
land rates vary
between Rs. 100 to Rs. 400 Lakhs per hectare.The
compensation for

buildings and structures etc. has been assessed in PETS

Report as 17.5% of
the land value.Based on the Consultants assessment,
including local
enquiries during the site visits, the total cost of land as
assessed in the PETS
Report seems to be reasonable.
4.2.2

Formation

Major element in cost for formation is the earthwork and

embankment with
earth borrowed from outside area.As the earth required for
embankment
has to come from outside the project area, implying longer
transportation
distances, the rate of Rs. 100 / - per meter 3 taken in PETS
Report is
considered reasonable.

4.2.3
4.2.3.1

Permanent Way
Rails & Fastenings

The rates for rails and fastenings have been taken on the
basis of Railway
Boards Circular issued for such rates and have been
increased by Rs.
5,000/- in each case, though this accounts for a very
minor portion of the

total Project cost.

4.2.3.2

Sleepers & Fstatenings

Similarly, the rates for sleepers and fastenings have also

been updated on
the basis of the current rates advised by Railway Board.
4.2.3.3

Ballast

The unit cost for procurement of ballast is Rs. 500/- per

meter3.As per
the Consultants review, the unit cost of procurement of
Ballast has been
reasonably priced in PETS Report as per the current
market rates.
4.2.3.4 CC Apron
Under this sub-head , PETS Report has also provided for a
CC Apron of
1700 m. length at a cost of Rs. 28.35 Lakhs.The reason
for the CC Apron
and the details are not included in the PETS Report.As the
bridges
proposed in the Project Report are ballasted deck,there
seems to be no
need for providing a CC Apron.This item has therefore
been deleted in
the review.

Implies Linear Meter of Waterway

4.2.3.5

Points & Crossings

The Consultants find that the rates taken for Points and
Crossings in
PETS Report are very low to compared to the present
market rates.
if these items are procured by private agencies the cost
of points and
crossings taken for each of 1 in 12 and 1 in 81/2 would
cost Rs. 3.92
Lakhs and Rs. 3.39 Lakhs respectively.The Consultants
have adopted new
rates for updating the cost of this item.However, this
item forms a very
minor portion of the total project cost.
4.2.3.6 SEI & GI
As per the PETS Report, the cost of switch expansion
joints is Rs. 16,399/and the cost of glued joints is Rs. 11165/-.The rates for
these items
adopted in the PETS Report have been updated with the
current market
rates / Railway Board rates, vide Circular Number
2000/CE-II/MPW/1
dated 22-04-03

Updating the cost for Permanent Way items based on

market rates /
Railway Board rates has resulted in an increase of Rs.
0.99 crores . The
individual quantities have been estimated approximately
for 8.5 Km
length for the purpose of comparison and validation of
quantities.
4.2.4

Bridges

Bridges form the major cost component for the project .A

major bridge of
length 1500 m is required for the project .In the absence
of any detailed
designs in the PETS Report, the cost details of two
bridges were
compared , to ascertain the cost of bridge required on
the project.
A road bridge which has been built between 2001 &
2003 for
The Cochin Port Trust, and which is located adjacent
to this
Proposed Railway Bridge was studied .The length
and width of this bridge are 1422.0 m and 11.5 m
respectively .This bridge has
Been built at a cost of over Rs. 50 crores and the
foundation
Depth has gone up to -65.0 m. The per-meter
construction cost
of this bridge works out to Rs. 3.33 Lakhs /meter 4.

 Another bridge along the costal line on eastern

coast of the Southern Railway was studied in the
other case. This bridge on
The Cuddalore Thanjavur section has foundation
depth lesser than the proposed railway bridge.The
per-meter construction cost of this bridge works out
to Rs. 290 Lakhs /meter.
Since the foundation depth required at Cochin and
Ernakulam is more than
the depth taken for the bridge on eastern coastline and
also since the
proposed bridge is being built for a double line section to
cater to future
traffic, the construction cost for the proposed Railway
Bridge has been
assumed as Rs. 3.25 Lakhs / meter.Based on this rate, the
cost of this
bridge requires to be substantially increased over the
PETS Report
estimate.The revised cost of bridges is estimated
upwards by Rs. 12.07
crores, to 50.65 crores.
4.2.5

Station Buildings (Including station machinery)

The service buildings and residential quarters included in

the PETS Report
Estimate have been assessed at a reasonable rate in the
range of

Rs. 6,000/- to Rs. 7,000/- per sq.m.In the miscellaneous

items estimates in
The PETS Report, snag dead end has been assessed at
Rs. 30,000/- each and buffer stop at Rs. 20,000/- each,
which is found to be on the lower side. These rates have
been updated based on Railway Board rates.These items
constitute a very small proportion of the total project cost.
4.2.6

General charges
The General charges are estimated at Rs. 4.36 crores, as
per PETS Report,
which is about 5.62% of the total civil engineering cost.
However, as per
the present orders of the Railway Board, the general
charges have been taken as 6.43% of Civil Engineering Cost.
Based on this, the revised general charges are estimated at
Rs. 5.54 crores.

4.2.7

Saving due to redundant provision

The CC apron provided at a cost of Rs. 0.28 crores is not
found to be necessary as per the Consultants review of the
PETS Report. Hence this item can be excluded from the cost
of civil engineering works.

4.2.8

Revised cost of civil engineering works

Based on the updating of the rates as explained above,
the revised cost of civil engineering works out to Rs. 91.53
crores, which is about Rs. 14.02 crores higher that the PETS
Report estimates of Rs. 77.51 crores. The comparison of the
cost as per PETS Report and as per Consultants review is
tabulated below:

Implies Linear Meter of Waterway

(Amount in Rs. Crores)

Sl.
No.
1
2
3
4
5
6
7
8
9

Item

As per PETS
Reprt

Preliminary Expenses
Land
Formation
Permanent Way
Bridges
Stations and Buildings
Equipment, Plant & Mchinery
General Charges
Savings due to redundant items
Total

As per Consultant's
review

0.03
25.97
1.63
6.57
38.58
0.37
0.01
4.36
N.A
77.51

A comparative statement of quantities and costs

reviewed is enclosed in
Annexure II. The detailed workings of the revision of
rates for Rails &
Fastenings, Sleepers & Fastenings and, points and crossings
are presented
in Annexure II (a), Annexure II (b) and Annexure II
(c) respectively.
4.3
4.3.1

Signaling & Telecommunication

Signaling

0.03
25.97
1.63
7.55
50.65
0.43
0.01
5.64
(0.28)
91.53

As per PETS Report, the cost of signaling at Vallarpadam and

Idappalli has
been estimated at Rs. 0.56 crores and Rs. 0.12 crores
respectively. The
signaling costs have been revised based on the Railway
Board rates. The
revised cost for signaling at Vallarpadam and Idappally are
estimated at
Rs. 0.72 crores and Rs. 0.15 crores respectively, resulting in
an increase of
Rs. 0.16 crores and Rs. 0.03 crores respectively.

Sl.
No.

Item

As per
PETS Report
(Rs. Cr.)

As per
Consultant's
Review
(Rs. Cr.)

Signaling

0.68

0.87

Block Working / Counters /

Yard alteration
Telecommmunication

0.42

0.97

0.3

0.3

0.46

0.46

Interlocking of level crossing /

alterations
Contingencies @ 1% of

0.02

0.02

General Charges @ 10.69%

0.19

0.21

Total

1.95

2.16

3
4

4.4

Electrical & OHE

The estimated cost of Rs. 3.57 crores as per the PETS Report
is found to be
reasonable on the basis of comparisons with other similar
projects and current market rates.
4.5

Revised cost estimate for the project (Film Cost)

Based on the above review , the revised cost estimate of the
project works out to Rs. 97.26 crores as against Rs. 83.03 as
per the PETS Report, indicating an increase of Rs. 14.23
crores (17%).The abstract of the revised cost estimate is
tabulated below:

Sl. No.

Item

Amount
(Rs. Crores)

Civil Engineering

Signaling & Telecommunication

2.16

Electrical & OHE

3.57

Total

91.53

97.26

This cost can be considered as the firm cost for the project.
Non-firm costs
have been estimated separately in the following section.
The statement
comparing the estimated project cost with project cost of
similar projects
in presented in Annexure III.
4.6

Estimates of non-firm costs

Non firm costs are estimated at Rs. 5.46 Crores for the
project. The details of the estimates of some non-firm costs
are provided in Annexure IV. Miscellaneous items amount to
Rs. 46.21 Lakhs.
4.6.1

Contingencies
The estimates in the PETS Report assume contingencies at
1% . In the opinion of the Consultants, this is too low a
figure for contingency provision. An additional provision of
5% contingencies is proposed, which is estimated at Rs.
4.86 crores.

4.6.2

KRCL Capital Costs

This is an additional item of cost, to cater to additional
communication and mobility requirements, in case the
redundancy in operating staff has to be reduced. These
operating standards are based on the Konkan Railway
staffing pattern, and the additional capital investments are
called KRCL Capital Costs and are estimated at Rs. 0.14
Crores. The details of KRCL Capital Costs are given below:

Sl.
No.

Description

Civil Engineering

Light weight motor trolley

0.015

Light off track temper

0.04

Miscellaneous

0.015

0.03

Signaling and
Telecommunications
Intelligent Data Acquisition
System
Light Motor Trolley

0.015

Mobile Communication Facility

0.02

Total

Quantit
y

Amount
(in Rs.
Crores)

0.135

The financial model has a provision by which these

additional costs may or may not be considered, at the
option of the analyst.
4.7

Total Project Cost Estimate (Firm and Non-Firm

Cost)
The Total Project Cost estimate, including firm and non-firm
costs, is summarized in the table below:

Sl. No. Item

A

Firm Cost

Civil Engineering

Signaling &
Telecommunication
Electrical & OHE

Total Firm Cost

Amount
(Rs. Crores)
91.53
2.16
3.57
97.26

Non-firm Cost

Contingency provision

4.86

KRCL Capital Cost

0.14

Misc. Items

0.46

Total Non-Firm Cost

5.46

Total Project Cost

102.72

5 TRAFFIC REVIEW
5.1

Key Meetings and discussions

The Consultants made field visits to Cochin Port,
Vallarpadam and Ernakulam areas, the Divisional Railway
office at Thiruvananthapuram and the offices of Kerala State
Industries Development Corporation (KSIDC). The list of
officials who were met is enclosed in Annexure V. In
addition, reference is made to a meeting on May 20, 2004 at
Kochi, held between Cochin Port Trust, Dubai Ports
International5 and its consultants, RVNL, CONCOR and IDFC,
where various aspects of the traffic forecast for the port and
connecting railway line were discussed and finalized.

5.2

Development of ICTT at Vallarpadam

The belief that Cochin port (Vallarpadam) has potential to

develop as an International Container Transshipment
Terminal (ICTT) hub in the Indian Ocean Region is founded
on its being the only major port in the Country that enjoys
the geo-strategic advantage of being located on the
maritime route connecting the Far East and Australia to
Europe, as shown in the figure below. In view of the
anticipated huge economic benefits to the country, the
proposed ICTT at Vallarpadam is a high priority project for
the Government of India and a lot of preparatory work has
already been done.

The successful bidder for developing the proposed ICTT at Vallarpadam

Vallarpadam, where the ICTT is proposed to be located, is an

island with no land connection. In order to provide land
access to the project site with the main land, the CPT, along
with the Government of Kerala, has formulated a selfsupporting scheme which envisages reclamation of 25
hectares of the land belonging to the Cochin Port Trust from
backwaters and using of the sale proceeds of this land for
construction of 3 bridges from Ernakulam to Vypeen via
Vallarpadam Island. The Chief Minister of Kerala chairs the
Goshree Island Development Authority (GIDA), constituted
for the purpose.The CPT is executing the construction works
connected with bridges as deposit work of State authorities

and more than 40% of the work has already been

completed.
Besides the land access to be provided by the abovementioned bridges, a separate road connection, bypassing
the city area and linking the National Highways (NH-17, NH47 and to NH-49 through NH-17 /47), will be a prerequisite
for smooth flow of containers from/to Vallarpadam by road.
The National Highway Authority of India (NHAI) has already
prepared a feasibility report for the purpose and it is
anticipated that NHAI would provide this road connectivity
by the time the Vallarpadam ICTT comes on stream. Since
rail connectivity is also essential for the ICTT, Vallarpadam
in view of it being developed as a regional hub, railways
have undertaken a feasibility study for providing a rail link
from Idappalli to Vallarpadam. The proposed development at
the Cochin port is shown in the map below.
Cochin Port mooted the idea of developing the ICTT at
Vallarpadam, and commissioned Dutch Consultants M/s.
Frederic R. Harris B.V. (FRH) in December 1998.
Aprocurement (bid) process was also set in place in 1999, to
select a developer/ strategic investor consortium to develop
the ICTT. Problems in the bid process and lack of clarity on
the project potential caused the bid process to fail in 2003.

In January 2004, Cochin Port went into a re bid of the ICTT

development, with alterations in the project definition. For
the RFP, Cochin Port commissioned M/s. Consulting
Engineering Services (India) Ltd for revalidating of Traffic
and shipping.

 The scope of this re-bid envisages the development of

ICTT at Vallarpadam/ Puthu Vypeen on Build, Operate
and Transfer (BOT) BASIS. {The major change is that
the optional arrangement of Puthu Vypeen has been
given}.
In the first phase a minimum berth length of not less
than 600m equipped with handling equipment and
stacking area to commensurate with the traffic needs
shall be provided. The Operator shall do further
augmentation of facilities at ICTT, based on the actual
traffic build up. Towards this end, initially, the existing
Rajiv Gandhi Container Terminal (RGCT) will be handed
over to the Operator for management and operation
for a maximum period of eight years, unless otherwise
agreed by the CPT, to build up the container traffic
from the present level. This terminal shall be properly
developed and equipped to meet the requirements of
growing traffic needs. On the traffic reaching a level of
4,00,000 TEUS per annum at RGCT, the construction of
ICTT shall be commenced by the Operator. The
construction shall be completed and commercial
operations commenced at ICTT within a period of two
years from the date of commencement of construction.
The Operator may, at his discretion, commence the
construction of ICTT even before the traffic reaches the
specified level. (The handing over of RGCT and the
commencement of the new facility only upon traffic
reaching 4,00,000 TEU is significant.)
Once the ICTT is commissioned, the operations at
RGCT may be discontinued.

A total of 14 Expressions of Interest were received,

including from PSA

(Singapore), P & O, Maersk, Dubai Ports International (DPI),

IL&FS + Punj Lloyd, etc. The selection process has since
been completed, with the project being awarded to Dubai
Ports International, the port management and consultancy
division of Dubai Ports Authority (DPA), which in turn is a
100% subsidiary of the Government of Dubais (100%
controlled ) company Ports, Customs and Free Zone
Corporation (PCFC).
From the above, it is clear that the development of the new
facility is being mile-stoned against actual build-up of
container traffic.
5.3
Traffic Projections in the Preliminary Engineering-cumTraffic Study (PETS)
Report FRH Study
Traffic Projections provided by the Cochin Port from time to
time have relied heavily on the study report by FRH in
December 1998. FRH did not conduct any detailed Origin
Destination study of container flows to and from
Vallarpadam nor did Cochin Port undertake an independent
study to assess the pattern of traffic.
The FRH report is based on a macro-economic and
econometric model. Assumptions and analysis made by FRH
form the basis of forecasts on which the proposals in the
PETS Report rest. The population of Vallarpadam is reported
to be just over 22,000. (Para 2-1 f Traffic Report referred to
hereafter as TR). It can be safely presumed that passenger
traffic on the Vallarpadam Idappalli rail link will be meager.
The Consultants, therefore, suggest this section should only
be opened for goods traffic for the first few years.
As far as container traffic on this line is concerned, FRH
report followed the following reasoning.

The key assumption in this process depended on the

assumed GDP
Forecast, and for this the FRH report considered three
scenarios:
Scenario I: Government of India retaining current
economic policies, as liberalized in 1991.
Scenario II: Government adopting more liberal policies
like those followed in East Asian Countries.

 Scenario III: Government reintroducing restrictive

economic policies in view of the controversy over the
WTO regime.
FRH report also considered three principal market segments
for the proposed ICTT at Cochin.
A share of Indias international trade currently being
transshipped to/ from West Coast Indian Ports, besides
Cochin, via the Port of Colombo.
A share of other traffic, which will, in the near future,
be affected by port capacity limitations elsewhere in
India, but can access Vallarpadam by Rail.
All traffic from Cochins hinterland, which currently
passes through RGCT on Wellington Island.
Based on the foregoing assumption and principal market
segments, the FRH report presented container traffic
projections for Vallarpadam transshipment terminal under
the following three scenarios:
Year
Scenario I

Total TEUs

TEUs by Rail

Rail Share (%)

2006-07
2011-12
2016-17

11,08,000
17,04,000
19,91,000

6,26,000
5,66,000
3,51,000

56.5
33.2
17.6

12,76,000
18,20,000
22,15,000

7,09,000
4,53,000
1,28,000

56
25
6

9,40,000
13,49,000
17,96,000

5,08,000
4,26,000
5,46,000

54
32
30

Scenario II
2006-07
2011-12
2016-17

Scenario III
2006-07
2011-12
2016-17

The PETS Report has adopted the traffic projections under

the pessimistic scenario (Scenario III) for the year 2011-12,
i.e., 4.26 Lakh TEUs.
5.3.1 Consultants Comments on the FRH Report / PETS Traffic
Projections
Projections, as detailed below:
i. Despite the vicinity of Cochin Port to the maritime
route and the efficiency the ports aims to achieve,
diversion of cargo from an established hub like
Colombo will not materialize immediately after
Vallararpadam is commissioned. Unfortunately this is
what the Port management has assumed, in their
traffic projections issued in September 2003. Pitching
yhe year of commissioning of Vallarpadam as 2007-08,
PETS Report has estimated a diversion of 4.26 Lakhs
TEUs from Colombo Port to Vallarpadam for
transshipment in a years time. This seems unrealistic
in the absence of supporting valid assumptions.
ii. The economics of container traffic in general and of
international container traffic in particular, depends in
part on overall savings in time and cost, but also on
logistic chains and agreements with major lines.
iii. Traffic at Vallarpadam ICTT should be based on
comparative cost advantage. For example, diversion of
container traffic from Colombo to Vallarpadam should
be guided by the comparison of all-inclusive costs,
including cost of movement from/ to hinterland to
Vallarpadam byrail/ road/ coastal shipping and port
charges at Vallarpadam. It may turn out that land
movement (rail or road) from Vallarpadam is not

iv.

v.

vi.

economical considering all aspects including network

congestion, compared to the Colombo transshipment.
Although this type of comparison was not explicit in
the PETS Report, yet prima facie it appears that cost of
moving containers directly to Vallarpadam including
port charges is cheaper in comparison to Colombo
port. This cost advantage could range between US$
150-200 per container.
It is, however, relevant to remember that all Ports,
especially those like JNPT, are taking up expansion and
modernization to cope with growth and be competitive
in the global market. Assuming that the status-quo is
to be maintained at other ports, while a new terminal
comes up at Vallarpadam, is simplistic.
The assumption regarding hinterland traffic is also
open to question. Materialization of traffic from
hinterland is subject to many vicissitudes.In the FRH
report, the present pettern of CONCOR traffic through
various ICDs to different Ports has been applied to the
projected Cochin container traffic, without any
modifications, to identify the hinterland for the
proposed ICTT. In the absence of cost comparisons, this
approach of identifying the hinterland of Cochin port/
Vallarpadam ICTT appears unrealistic in as much far off
places like Delhi, Punjab, Rajasthan and New Mulund
(Mumbai) are assumed to contribute as much as 60%
share of container traffic to Vallarpadam.
Discussions with CONCOR also revealed that another
assumption of Cochin Port authorities, which states
that the hinterland traffic by rail will amount to 30% of
the total container volume is arbitrary. The following
table gives the actual share of CONCOR traffic to and
from Cochin Port over the past five years. From the
table , it can be seen that the CONCOR share averages
15% and it also includes 5% (approx.) of road

movement. With better roads coming up under the

Prime Ministers National Highway Development
Program and visible advances in truck technology,
road share for container transportation may also
increase.
Year

Total TEUs (In Lakhs)

Share of CONCOR
(incl. road) in%

1996-97

1.12

15.36

1997-98

1.21

13.73

1998-99

1.26

11.25

1999-00

1.29

16.93

2000-01

1.39

16.29

2001-02

1.51

17.35

2002-03

1.64

13.97

vii.

Recently the Minister for Ports and Co-operation of

Kerala Government talked of the possibility of
developing Vizhinjam near Trivandrum as an
International Container Transshipment facility and
stated that Vizhinjam had several natural advantages
like location, draft etc. The Minister felt this might not
affect the proposed Vallarpadam ICTT. But it is clear
that two similar expensive projects cannot operate in
such a close vicinity of each other. However, despite
the Vallarpadam ICTT having been awarded, the
Government of Kerala appears to be going ahead with
the plan for Vizhinjam.

In the light of rather unsubstantiated traffic projections to

Vallarpadam port, arising out of FRH Report and the further
projections made by Cochin Port authorities, the Consultants
have not considered the FRH projections any further.
Given the nature of the Project, the Consultants
consider it essential that the Port Management
should undertake a Proper Origin-Destination Study
for the streams of traffic at Cochin and the
comparative advantages that Vallarpadam ICTT will
offer vis -a-vis JNPT, NSITC, Mundra, Pipavav and
Chennai to arrive at realistic traffic projections.
5.4

Traffic Projections- Current Review

Given the high priority attached by the Government of India
to the proposed ICTT at Vallarpadam, there is high likelihood
of this project materialization which in turn needs proper rail
connectivity for efficient movement of containers.However,
the traffic projections contained in the FRH Report and taken
into the PETS Report are not properly justified. In this
background, the Consultants have formulated an alternate
statistical and probabilistic method for traffic projections for
the proposed new BG rail link between Idappalli and
Vallarpadam. The rationale for this approach is explained in
the following section. A 20-year plan horizon has been
taken, and 2012 has been taken as the evaluation year for
the key variables in the probabilistic analysis. Finally, it may
be noted that the analysis focuses on the Railway Traffic,
and does not purport to analyze the performance of the
Port.
5.4.1 Probabilistic Macro-economic Analysis
In the absence of an Origin-Destination study, a macroeconomic model is used to estimate the traffic projected at
the Vallarpadam ICTT, related to railways. However, instead
of using deterministic methods to assign judgmental and

subjective numbers to various key parameters, a statistical

and probabilistic approach is used to assess the impact of
the following key variables on the traffic projections.
Description
GDP Growth

Low Case

Base Case High Case

4.50%

6.00%

7.50%

45.00%

50.00%

55.00%

General Cargo Share of Cochin

3.50%

4.00%

4.50%

Container Cargo Share of Cochin

5.00%

6.00%

12.00%

10.00%

12.00%

15.00%

Containerization

Railway Share

GDP Growth: In the last decade, GDP Growth in

India has had a CAGR of less than 4.5%, and this is
taken as a low case . For a plan horizon of the next
10 years, the high CAGR for GDP is assessed as
7.5%.
Containerization: Presently, about 45% of the
General Cargo is containerized. A 10% increase
would make 55% of general cargo to be constituted
of containers, and this has been taken as the high
case.
General Cargo Share of Cochin: Cochin has been
sharing about 3.5% of the Countrys General Cargo,
and this is taken as the low case. Since the ICTT will
not change the general cargo proportion
significantly, this is assumed to increase to a share
of 4.5% on the high side.
Container Cargo Share of Cochin: This is a
critical variable, where some thought is required.
Currently, Cochins share of the Countrys container
movement is about 5%, and this would be the low
case. On the high side would be the impact of
Cochin becoming an ICTT, and substantial diversion
of traffic from Colombo. The FRH Report assesses

that about half of the India-bound container traffic

from Colombo, which is about 70% of the total
Indian Container traffic, would get diverted to
Cochin. The revised assumptions of Cochin Port
assume that this figure is about 15%6. As discussed
before, it may be unrealistic to take too vast a
surface hinterland for the Cochin Port. Ports on the
East Coast of India may find Colombo still
competitive, and regions in the North may prefer
JNPT/Mundra/Pipavav. Almost all Ports are having
expansion programs with private sector
participation, many of which are targeted on
handling containers JNPT, Pipavav , Mundra,
Chennai and Visakhapatanam included. In this
scenario, a high case of 12% of the Countrys
container traffic appears reasonable.
Railway Share: Of the total container traffic at
Cochin, only a fraction will move by Rail. This share
as of now (Concor) is about 10%. Increase in this
share to 15% is taken as a high-case scenario, since
this will entail significant network investments and
not just the project line.

However, only a quarter of this 15% has been taken for assessing traffic on rail
and road modes. This 15% is also in addition to assessed hinterland traffic

5.4.2

Base Data and Regression

Base data on the Port scenario, with regard to general

cargo and containerization have been taken from secondary
sources, and primarily from the India Port Report prepared
by I-Maritime in 2003, which was sponsored by IDFC, JNPT
and Adani Port. This data has been regressed linearly or
exponentially, depending on the nature of the variable and
the regression residual distributions. Into this model, the
variables mentioned above have been introduced, and a
proprietary program has been used to complete the
statistical analysis. Some of the base-value charts are
shown in the following figures.
5.4.3 Tornado Analysis
In a probabilistic analysis, it is important to identify which
of the variables have a greater impact, and then to study
those variables in greater detail. A Tornado Analysis has
been run to identify the critical variables. The results of the
Tornado are presented in the figure below.
The plot for Railway Share is not relevant in this figure, since
it is a downstream calculation from TEU, and therefore the
analysis of TEU is not affected by that variable. The Share of
General Cargo does not impact container traffic, and is
therefore omitted from an iterative analysis. Of the other
variables, the plot appears most sensitive to Container
Cargo share of Cochin, which has an extremely wide range
(Swing from a status quo situation to metamorphosing into
a major hub). This and the other variables (GDP Growth and
Containerization) are considered further in the statistical
analysis.
5.4.4 Schematic Probability Tree
The figure below indicates the assigned probabilities to each
of the four independent variables. The evaluated functions
are the TEU and the number of trains in the year 2012. In a
standard format, the probabilities are assigned at 25% of
each of the low and high cases, and at 50% for the base

case. An iterative function is run to evaluate the

spreadsheet for all possible combinations to obtain the
event probabilities.
5.4.5 Probability Plots
It can be seen that though a deterministic high-case analysis
would show much higher individual figures (refer table below), the
Parameter

Unit

Low

Base

High

Cochin 2002

TEU (000)

152

152

152

5.80%

10.62%

21.53%

TEU (000)

267

417

1068

Per day

CAGR 2012
TEU in 2012
Trains in 2012

probability of their occurrence is low.

The statistical analysis shows a much lower expected value.

The results of the probability analysis are presented in the
form of histogram plots for the TEU as below.
5.4.6 Tabulation of Port & Rail TEU for Base Case
Year

2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015

Total
Containers by
Containers at
Rail
Port
(in 1000 TEU)
(in 1000 TEU)
211
230
250
271
335
361
388
417
448
480
514

25
28
30
33
40
43
47
50
54
58
62

2016
2017
2018
2019
2020

551
589
630
673
719

66
71
76
81
86

5.5
Comparison with CES Study Cochin Port Projections
Of Sept 2003
In September 2003, CPT submitted a letter to Railways
regarding the Railway link substantiated with a revision of
data from FRH Report considering the current trends and
RITES Report of Vision 2020 for Port Sector. CPT has taken
a more conservative outlook based on the fact that the FRH
Report numbers for 2001-02 were projected to be 4.2 Million
TEU, WHEREAS THE National Container Volume had reached
only 3.3 Million TEU by 2002-03. The logic followed was
virtually the same as the FRHs Colombo-centric model, but
the proportions were reduced in a subjective manner.

5.6

Subsequently, in 2004, Cochin Port commissioned M/s.

Consulting Engineering Services (CES) to carry out a traffic
assessment for the proposed ICTT. The results of this
assessment were used as a basis for the bid process. In
view of the fact that the study has now been superceded by
the traffic estimates that Dubai Ports International (DPI) has
bid on, these interim assessments have not been
considered further.
Dubai Port Internationals Traffic Projection

As part of their successful bid, DPI has carried out a traffic

assessment
study. The logic of the study follows the same econometric
model, commencing from the GDP forecasts.
Year

Low Case
TEU

Base Case
TEU

High Case
TEU

Total

Potential
Total
rail traffic
throughput
27,212
194,373

Potential
Total
rail traffic
throughput
27,601
208,950

Potentia
rail traffi
29,6

2005

194,373

2006

219,664

31,851

238,434

36,719

268,238

42,3

2007

248,258

37,239

275,745

45,774

324,000

55,0

2008

280,585

43,491

318,496

56,692

398,120

75,6

2009

396,419

64,220

452,600

85,994

565,750

118,8

2010

448,076

76,173

522,389

105,523

652,985

150,1

2011

506,483

91,167

599,736

128,344

749,670

187,4

2012

572,520

111,641

701,234

158,479

876,541

236,6

2013

647,190

135,910

805,866

191,796

1,007,333

292,1

2014

731,618

160,956

939,135

234,784

1,173,919

352,1

2015

827,081

181,958

1,077,298

269,324

1,346,621

403,9

2016

935,020

205,704

1,241,456

310,364

1,551,820

465,5

2017

1,057,065

232,554

1,407,443

351,861

1,759,303

527,7

2018

1,136,344

249,996

1,513,000

378,250

1,891,250

567,3

2019

1,221,569

268,745

1,626,475

406,619

2,033,094

609,9

2020

1,313,186

288,901

1,748,460

437,115

2,185,575

655,6

A more detailed tabulation of the results is given in

Annexure VI.
Year

2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

DPI Base
Case
Rail TEU
(1000)
28
37
46
57
86
105
128
158
192
235
269
310
352
378
407
437

IDFC Base
Case Rail TEU
(1000)
25
28
30
33
40
43
47
50
54
58
62
66
71
76
81
86

5.7
Conclusions on
Traffic
A comparison of the
base-case movement of
containers by Rail (Rail
TEU) for the statistical
analysis and that used
by DPI is given in the
following table.

It can be seen that the growth in Rail Traffic as per the DPI
estimate is very high, as compared to the statistical
method adopted by the Consultants. This is because in the
DPI estimate, not only is there a substantial increase in the
Port Traffic, but a progressive increase on the rail share as
well, increasing from 14% to 25% of the total traffic. In a
sense, the rail traffic growth is compounded twice.
It should be kept in view that concurrently other ports
(Indian ports, as also other regional international ports) are
also actively pursuing expansion plans, many of them with
Private Sector Partners. These existing ports have
depreciated assets, existing linkages and client
relationships. Hinterland development, linkages, port
economics and a host of other factors will play a part in the
development of the ICTT. In the opinion of the Consultants,
the DPI estimate is on the high side, and though such a high
case is theoretically possible, the probability is low.
However, during the meeting with Cochin Port, RVNL and
DPI on 20th May 2004, it was decided that since DPI was the
successful bidder for the development of ICTT, and
assuming responsibility for the development of the Port,
DPIs traffic analysis may be used for the assessment of rail
traffic on the proposed rail link between Vallarpadam and
Idappally.
5.8

Projected Rail Traffic

The number of trains per day is calculated on a 330 day
year, with 80 TEU per train, and given in the following table:

Year

Low Case

Base Case

High Case

Potential Trains Per Potential Trains Per Potential Trains Per

rail traffic
Day
rail traffic
Day
rail traffic
Day
(1000
(1000
(1000 TEU)
TEU)
TEU)
2005

27

1.03

28

1.05

30

1.12

2006

32

1.21

37

1.39

42

1.61

2007

37

1.41

46

1.73

55

2.09

2008
2009

43
64

1.65
2.43

57
86

2.15
3.26

76
119

2.87
4.5

2010

76

2.89

106

150

5.69

2011

91

3.45

128

4.86

187

7.1

2012

112

4.23

158

237

8.96

2013

136

5.15

192

7.27

292

11.07

2014

161

6.1

235

8.89

352

13.34

2015

182

6.89

269

10.2

404

15.3

2016

206

7.79

310

11.76

466

17.63

2017

233

8.81

352

13.33

528

19.99

2018

250

9.47

378

14.33

567

21.49

2019

269

10.18

407

15.4

610

23.1

2020

289

10.94

437

16.56

656

24.84

2021

311

11.76

470

17.8

705

26.7

2022

334

12.65

505

19.13

758

28.7

2023

359

13.6

543

20.57

814

30.83

2024

386

14.62

584

22.12

840

31.82

2025

415

15.72

628

23.79

840

31.82

From the above table it is evident that by the DPI estimates,

the railway requirement7 is only beyond the years 2010,
assuming that at least four trains a day is a reasonable
requirement.

That is in view of traffic. The Port or Railway may decide to create the Rail Link
before this, based on strategic and other considerations.

6
HANDLING CAPACITY FOR PROJECTED
THROUGHPUT
The PETS Report indicated line capacities on different subsections of Ernakulam Shoranur Section. According to this
report, the charted capacity on Shoranur Punkunnam,
Punkunnam Trichur and Trichur Ernakulam section is 41,
41 and 47 respectively. This appears to be on the low side for a
double line electrified section with MACL signaling. The
Consultants discussed these figures with COM and Dy. COM/
Planning of S.Rly. It was explained by S.Rly that there are steep
undulating gradients between Trichur and Shoranur with the
ruling grade of 1 in 80. The max speed of trains is 80 Kmph. The
longest block section is 12.23 Km. Mail & Express trains stop
practically at all stations. The single line section between
Shoranur-Palghat at the side of the triangle at Shoranur restricts
free flow of trains from Ernakulam side.

A perusal of master chart drawn by the Southern Railway for this

section brought out that there is scope to redo the chart for the
correct assessment of capacity. It is understood that the capacity
on Trichur and Punkunnam has already been increased to 47
instead of 41.

In respect of passenger traffic, one additional passenger train per

year is being regularly introduced every year. The growth in

passenger services for the last 5 years is as given below. An

analysis of the number of passengers on this section shows a
regular increase of about 1000 passengers a day every year.
Hence introduction of one train per year is justified.

Year

No. of Trains/day

1999 -2000

26.50

2000 - 2001

27.50

2001 - 2002

28.50

2002 - 2003

29.00

2003 - 2004

30.00

A double line electrified section with MACL signaling should be

capable of being upgraded to 65-70 paths. Automatic signaling is
a good solution but the gradients on Trichur Shoranur section be
a constraint. The other way to increase capacity is to split the
block section suitably by intermediate block signals so that no
section is longer than 5 Km. By this method capacity can be
increased to 60 paths and more.
The following table gives the profile of traffic on this section for
the next 10 years, assuming (+) 1 passenger for every year, +0.2
goods train and +0.1 container train every year, up to 07-08, i.e.
till the expected commissioning of ICTT and the container traffic
by rail as projected under the base case scenario.
(Trains each way)

Type of
Trains

20052006

20062007

20072008

20082009

20092010

20102011

20112012

20122013

Passenger

32.00

33.00

34.00

35.00

36.00

37.00

38.00

39.00

Goods

7.40

7.60

7.80

8.00

8.20

8.40

8.60

8.80

Departme
ntal
Container

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.05

1.39

1.73

2.15

3.26

4.00

4.86

6.00

41.45

42.99

44.53

46.15

48.46

50.40

52.46

54.80

Total

If the line capacity of the existing double line section (ErnakulamShoranur) can be increased to 60+ by using other methods, this
traffic can be handled on the existing line without having to
construct the proposed new line between Idappalli Guruvayur
Tanur.

7.1

OPERATION & MAINTENANCE

Vallarpadam yard
Depending on the volume of traffic the proposed facilities
have to be reviewed. Three lines which means one
reception, one dispatch and one Engine run round line, can
work only if the incoming rakes are removed immediately
after their arrival for loading/unloading; similarly if the
outgoing rakes are dispatched without delay.

7.2

Other Requirements
Rolling stock requirement has been worked out on the
basis that 4,00,000 TEUs will be railed (say year

2020). This requirement needs to be worked out on

the basis of new traffic projections.
PETS Report is silent on the maintenance facilities
required for additional locos (diesel and electric) and
BFK wagons. A rake maintenance depot for BFK rakes
should be planned at a suitable location by CONCOR,
based on its convenient ICD/ maintenance locations, if
the need arises to maintain assets worth Rs. 20-30
Crores.
Requirements for additional crew has not been
specified nor costed.Crew based at Ernakulam should
operate the container trains from and to Vallarpadam.
Taxi arrangements should be made between
Vallarpadam and Ernakulam for transporting crew.
Junction arrangements at Ernakulam Goods
need closer look. The density of passenger trains on
the main line is quite high and surface crossings will
cause severe detentions to container trains to and
from Vallarpadam. A flyover is considered
necessary even it means relocating the proposed
junction arrangements. A proper site survey will be
needed to assess the cost of this flyover.
Details of Additional guards and supporting staff for
Vallarpadam container traffic have not been indicated
in the PETS Report.
The proposal of KRC to use Ernakulam goods yard, as
an exchange yard should be reviewed to ascertain its
viability. Prima facie, it indicates more disadvantages
as it involves reverse shunting. It is surprising that
PETS Report in Para 12.21 mentions that exchange
yard will save detention to rolling stock and ensure
better planning by the operating department while the
covering letter to the Board (Para 66) calls this

proposal as a retrograde approach and recommends

that it should be discouraged.
Rail link from Vallarpadam to Idappalli should be
single line to start with. Infrastructure provisions
should however be made to accommodate a double
line as and when the need arises.
7.3

O&M Fully Recovered Costs Basis

It is envisaged that a large number of projects, which are
currently under process by RVNL are likely to be taken under
SPV or BOT route, where cost of operation and maintenance
shall be key parameters for the viability of the projects.
Presently staff cost alone accounts for more than 50%
(approximately) of the total expenses, which can be
significantly reduced by way of mechanized maintenance
and better management practices. Hence cost of operation
& maintenance has assumed greater significance in the
case of new projects from the point of view of private
investors.
As against the existing standard practice of costing being
followed on Indian Railways, which is based of the principle
of fully distributed cost, costing of Operation &
Maintenance on the Project Railway is on the basis of fully
recovered cost. By following innovative methods it is
possible to reduce operation & maintenance cost
substantially:
(i)
(ii)

Mechanized maintenance of assets

Costing of material on the basis of actual
expenditure incurred
(iii) Deployment of staff on zero based principle, and
(iv) Devising a computer based module for computing
various variable cost incurred on train operation.

7.4

Operating Cost Assumptions

(i)

The O&M cost given are only for freight trains and
do not cover O&M costs for passenger train
operations, as the line may not have passenger
traffic.
(ii) The Operations & Maintenance cost depends upon
the type of Permanent Way structure, type of
signaling, system of train operation, number of
level crossings, mode of traction and traffic level.
(iii) It is envisaged that the existing control offices
under the control of zonal railways will continue to
manage train operations and no separate control
will be set up.
7.4.1

Inputs Required
The calculation of O&M cost takes inputs in terms of
Technical details and Number of trains projected. Technical
details comprises of following Project details about the
project.

Inputs required for calculation of O&M cost by PRCL 8

method :

Sl. No. Characteristics

1.

Length of section(km)

2.

Single line / Double line

3.

Equated Track Km

4.
5.

No. of Bridges and Length of free

waterways in meters
separately for major and minor bridges
Number and Class of Stations

6.

No. of level Crossings, Manned / Unmanned

7.

Mode of Traction, Diesel or Electric

8.

Type of Signaling and inter-locking

9.

No. of Signaling Units

10.

No. of Telecom Units

11.

Sectional Speed

12.

No. of Gods Trains, projected in different

scenario
Railway Jurisdiction of Project

13.

maintenance

Pipavav Railway Corporation Ltd. (PRCL), LIKE Konkan Railway, uses less staff for

7.4.2

Cost Components
Total O&M cost comprises of following three components
a. Cost of Staff Establishment, both direct &
indirect,
b. Cost of Material required for maintenance of
various assets and
c. All Variable Cost, incurred for running freight
services.

7.4.2.1

Estimation of Staf Cost Guide lines followed

Deployment of following categories of railway staff has

been taken into consideration:
Traffic Transportation,
Traffic Commercial,
Engineering,
Signaling & Telecommunication,
Electrical Traction Distribution in case of Electrified
Territory,
Electrical General
Accounts,
Personnel and RPF.

Number of staff is estimated as per Hours of Employment

Rules (HOER) in case of Traffic Transportation and
Engineering; and on the basis of mechanized track
maintenance on Konkan Railway as notified by Railway
Board, vide their letter No. 2001/ Track/ iii/ TK/ 4 Dated
5/9/2001; and as per prevailing norms/ benchmarking on
Zonal Railways.
The engineering staff has been derived, based on ETKM
taking 1.5 X Length of Project corridor as done in Pipavav

project because the nature of project under consideration is

the same.
In the case of TRD, number of staff is calculated @ 0.5
persons per traction km as per Railway Boards letter No.
2001/ Elect (G) /138/3 Dated 5.11.2002.
Railway staff cost consists of actual sum of pay, TA, over
time, bonus, etc which is payable through regular salary.
The cost of overheads, like pension & gratuity (P&G) @ 8.5%
and medical@ Rs. 2463/- per person per annum as notified
by Railway Board for 2003-04, has been separately
calculated and added in the overall cost. The average salary
being paid of PRCL has been taken, as there is more or less
representation of all such categories of staff at PRCL.
Staff cost has been calculated @ Rs.1,05,113/- per person
(PRCLs Average cost per employee per annum) for the base
year (2003-04). The staff cost for succeeding years has
been escalated @5% per annum from the previous year,
though it may vary based on government policies.
7.4.2.2

Assumptions and considerations in Staf Cost Estimation

It is assumed that all gates on Vallarpadam Idappalli
section are traffic gates
In this section, which is very short, no separate control
office may be required.
It is also suggested that activities like electrical
general maintenance and maintenance of works and
buildings can be outsourced in order to contain cost of
operation.
No mechanical staff is proposed for wagon
maintenance, as the project railway will pay cost of
running repair, which includes the element of staff for
wagon maintenance purposes, as a part of variable
cost.

 Staff for management of accident and related

activities has not been proposed as this will continue
to be managed by the concerned railway as the
section is very short.

7.4.2.3

Cost of Material

Cost of material required for operation and maintenance

has been estimated approximately based on unit cost of
maintenance taking historical cost of maintenance on
Western Railway (2002-03) on the basis of:
Equated Track Kilometers (ETKM),
Number of block stations,
No. of Signaling/Telecommunication units falling along
the project alignments. We can assume the same cost
on the projects falling of other railways as well
Further, in case of SPV route the cost of material shall be
charged as per actual from the second year of operation,
which shall be substantially lower because of the new
assets.
7.4.3

Variable Cost
As rolling stock of Indian Railways will be freely moving over
the project railway, cost of locomotive and wagon hire
charge as applicable for inter-railway financial adjustments
has been taken into account. Further, five additional
components of variable cost has been estimated viz.
Running repair charges for wagons, cost of traction, cost of
crew, cost of documentation and cost of compensation/
claims. Separate scenario has been given by taking the
Wagon/Loco hire charges with element of interest. On a

conservative note, the financial analysis has been done with

this assumption.
For container trains, wagon hire/ running repair/
documentation charges
and compensation claim charges
are not accounted for, as these charges are not payable by
SPV / Railway Administration and are borne by the train
operator.

Values used to estimate variable cost of O&M

Parameter/Factor
Wagon hire charge without element
of interest
Wagon hire charge with interest
Wagon repair charge as per SR
figures
Loco hire charge w/o interest
Loco hire charge with interest
Crew cost

Value Unit
143
384

Rs. per wagon day in use

Rs. per wagon day

46
594.6
3
648.3
4
19

Rs. per wagon day in use

Documentation

Diesel Price
Electric Traction

21

Electricity Consumption in SR

Eledtricity Tariff in Kerala for

SR
Speed as per SR value
SFC as per SR value, including lube
oil

Rs. per engine hour

Rs. per engine hour
Rs. per 1000 GTKM
Rs. per wagon loaded
(outward)
Rs. per liter (prevailing
rate)

10.1

KWH per 1000 GTKM

3.42
25.7

Rs. per unit

KMPH

3.68

Per 1000 GTKM

Source: As per PRCL experience, Annual Statistical Statement of 2001-02

and
Railway Boards Circulars referred above

7.5

O&M Costs for Valarpadam Idappalli Line

The projected traffic estimates are converted into

appropriate units (GTKM and number of Trains) for
determining the Fixed and Variable Costs. These costs are
determined for a few specific years, but in the financial
model they are converted into a fixed cost and a variable
cost on a per MTPA basis, so that the analysis can be done
over the entire life of the Project.

Container Traffic & Number of Trains (Both ways)

No. of Trains (both ways)
Low Case
Year

Tonnage

TEU

Trains

MTPA

In'00
0
27
76
182
289
415

No./ day

2005
2010
2015
2020
2025

7.5.1

0.34
0.94
2.26
3.59
5.15

1.02
2.88
6.89
10.95
15.72

No. of Trains (both

ways)
Base Case

No. of Train
Hig

Tonnag TEU
Trains
e
MTPA In '000 No. /day

Tonnag
TEU
e
MTPA
In '00

0.35
1.32
3.34
5.43
7.8

28
106
269
437
628

1.06
4.02
10.19
16.55
23.79

0.37
1.86
5.02
8.15
10.43

Staff Cost
The Railway staff required on the Project line has been
estimated for different levels of traffic. The details of staff
required for various departments are presented in
Annexure VII: -

Traffic
Level

No. of Staff
including RG/LR

2005

2010

2015

2020

2025

30
150
404
656
840

Low Level 50

5,518,72 7,043,452 8,989,428 11,473,04 14,642,83

9
1
1
5,518,72 7,043,452 8,989,428 12,620,34 16,107,11
9
6
4

Base Level 50, 55 depending

upon
the No. of Trains
High Level 50, 55 depending
5,518,72 7,043,452 9,888,371 12,620,34 16,107,11
upon
9
6
4
the No. of Trains
Summary of Staff Cost (in Rupees)

7.5.2

Material Cost
Material cost estimated for Electric traction is given below,

( in Rupees)

Material
Cost
Civil Engg.
S&T
Electrical
Operating

2005

2010

2015

2020

2025

807,427 1,030,504 1,315,213 1,678,583 2,142,344

111,961
142,894
182,373
232,759
297,066
590,625
753,803
962,065 1,227,866 1,567,103
134,141
171,202
218,502
278,870
355,916

Total

1,644,154 2,098,40 2,678,15 3,418,07 4,362,429

3
3
8
Note: - The fixed material cost does not change with the volume of
traffic.

7.5.3

Variable Cost per MTPA

(in Rs. Lakhs)

Year
Number of Trains
MTPA
a) Loco hire charges
(assuming 20 min. & 3
hrs
terminal detention /
train)
b) Total GTKM
c) Cost of Traction
d) Crew Cost

Total Variable Cost

2005
1.02
1
23.9

6,645,555
7.44
4.09

35.44

7.5.4

Total O & M Cost

The O & M Costs obtained by the above analysis are
converted to numbers that can be used in the year-on-year
financial model. This is done by reducing all the numbers to
the present value terms for the base year 2002, and then
averaging the numbers.

7.5.4.1 Staf Costs

The staff cost estimated for 3 different volume of traffic is
summarized in the table below:

(in Rs. Lakhs)

7.5.4.2

Scenario

Base
Year
2002

Low Case
Base Case
High Case

47.67
49.58
50.53

Material Costs

The material cost estimated for the project is Rs. 14.20

Lakhs per annum (Base year 2002) the all the scenarios of
traffic.
7.5.4.3

Variable Costs

The variable cost estimated for the project is Rs. 31.06

Lakhs per MTPA
(Base year 2002).
7.6

Fully Distributed Costs

Given the fact that the project does not appear to be viable
if taken as a small section of port connectivity, an option is

that it may possibly be structured as a standard railway

project, considering the entire hinterland railway. Therefore,
an analysis is also made on a fully disturbed cost basis. This
analysis is based on the data given in the Indian Railway
Statistical Year Book 2003 and Summary of the end
results Freight Services Unit Costs, 2001-2002,
Directorate of Statistics & Economics, Ministry of
Railways and is tabulated under the major heads as given
below.
Working Expenses, Freight

Cost in Rs.

Marshalling
Provision & Maintenance of
Wagons
Line Haul (Diesel)
Line Haul (Electric)
Line Haul - Other Transportation
Services
Line Haul - Track and Signaling
Overheads
Central Charges
Escalation

Unit

383.1 per wagon per yard

151.12 per wagon per day
135.25 per 1000 GTKM
71.28 per 1000 GTKM
31.97 per 1000 GTKM
36.81 per 1000 GTKM
27.81%
0.54%
15.33%

For calculating the total O&M costs based on a fully

distributed costs model, the average lead for freight (as per
the Statistics for Southern Railway) is 346 km. Calculations
are made for conveying 1000 TEU for this distance of 346
km. For this calculation, it is required to convert the units
into Tons and GTKM equivalents. This is done by using an
assumption (derived from Container data at ports) that 1
TEU ~ 14.92 MT (12.42 Net plus 2.5 Tare).
Expenses For Moving
1000
TEU by Project

Unit

Value

Distance
Freight Moved
Distance
Loaded Wagons
Empty Wagons
GTKM
Wagon Load
Wagon Tare
Wagon Turn-around

TEU
Km
No.
No.
Tons
Tons
days

Working Expenses, Freight for

1000 TEU
over 346km lead

1000
346
500
500
9,082,5009
48
19
5

Amount
(Rs. )

Marshaling

191,550

Line Haul (Electric)

647,401

Line Haul - Other Transportation

Services
Line Haul - Track and Signaling

290,368

Overheads

407,040

334,327

Central Charges
Escalation
Total (Rs. per 1000 TEU lead by 343
km0
Unit - per TEU per km
Unit - per MT per km

10,102
288,325
2,169,111
Rs. 6.27
Rs. 0.42

80 TEU and 2100 MT gross tonnage per train

The following observations are relevant:

Other terminal services are neglected.
Electric traction is assumed, and therefore diesel cost
is nil.

 The PETS Report has not considered documentation

charges, which assumption is in light of the fact that
this would be done by CONCOR.
The PETS has taken a marshalling cost of Rs. 153 per
wagon per yard, whereas the data for Southern Railway
indicates a cost of Rs. 383.10 per wagon per yard.
The above analysis has been used to derive the financial
viability and structuring of the project, as set out in Volume
2 of this report.

MISCELLANEOUS
a. Summary of Savings for the new line Idapalli
Guruvayur (Annexure- 9/4 of PETS Report) is
presented in Annexure VIII.
b. Estimated operational savings of Rs. 246.665 Lakhs
(Annexure 9/1 of PETS Report) due to diversion of 5
mail/ express trains via Guruvayur Idapalli is not
likely to materialize due to public resistance. There
are many important stations between Trichur and
Ernakulam like Chalakudy, Angamali, etc., having
heavy inward / outward passengers.
c. If at all this line is constructed, it will be better to
divert more goods trains on this line as savings for
each goods train has been worked out as Rs. 84.84
Lakhs. This will also minimize losses by the diversion
of Mail/ Express train on the shorter route.
d. Diversion of passenger traffic on New line (Annexure10/1 of PETS Report) is presented in Annexure IX:
The Consultants have reservation about the
estimates worked out in PETS Report for the diversion
of passenger traffic from road to rail. The frequency
of road vehicles between certain pairs of destinations
like Paravur Vypeen / Kodungalur/ Irinjalakuda and

Pdoor Guruvayur is too good to permit of any

diversion unless the rail fares are very competitive,
which is not likely. There is non-availability of data
about fares in the PETS Report.
e. Proposed rail link to ICTT at Vallarpadam should be
only for goods traffic. If restricted to goods traffic
alone, at least till it is doubled there will be no need
to provide platform shelters, and other passenger
amenities.

IMPLIMENTATION SCHEDULE
According to the Consultants assessment, the project could
be implemented within a time frame of 3 years. The PETS
Report also envisages the same time frame for
implementation of the project. A chart detailing out the
implementation of the project in different phases during the
implementation period is presented in Annexure X.

10

CONCLUSION
Traffic projections and growth patterns made so far in
respect of the container traffic to be handled at the
proposed Vallarpadam container terminal Vallarpadam
Idapalli rail link need to be backed by proper origin
destination study to make a pragmatic assessment. The
traffic potential based on a statistical macro-economic
approach, as well as that adopted by the successful bidder
(DPI) for the Port Project is provided in the section on Traffic
Review.

If the Government decides to go ahead with the

construction of an ICTT at Vallarpadam, a rail link is
undoubtedly necessary and should be provided with the
required sense of urgency. However, in such a case the
project line would not have stand-alone viability and would
need financial support in some form. The financial viability
and structuring options are discussed in Volume 2 of this
report.
From whatever information and data the Consultants are
able to gather and consider at present, the new line
proposed between Idapalli and Guruvayur is not necessary
for handling the incremental container traffic from/to
Vallarpadam. This can be more efficiently handled by
augmentation of line capacity of the existing double line
electrified route between Ernakulam-Shoranur. Splitting
block sections through appropriate signaling techniques can
augment line capacity.
It is an entirely different matter if the new line is needed for
opening up the coastal belt along the western corridor of
the state, which is a thickly populated area. Prospects of
industries along this belt are not promising.

11 LIST OF ANNEXURES

Copy of per Railway Board Circular Number 2000 / CE

II / MPW / 1, dated 22-04-03.
o Annexure I
Comparative statement of quantities and costs
o Annexure II

 Detailed workings of the revision of rates for Rails &

Fastenings, Sleepers & Fastenings and. Points &
Crossing
o Annexure II (a) to (c)
Benchmark Comparison with similar projects
o Annexure III
Non-firm costs.
o Annexure IV
Key officials met
o Annexure V
Traffic data DPI Estimates
o Annexure VI
Details of estimated staff on the Project Line
o Annexure VII
Extracts of Summary of Savings for the new line
Idapalli Guruvayur as per PETS Report
o Annexure VIII
Diversion of passenger traffic on New line as per PETS
Report
o Annexure IX
Proposed Implementation schedule
o Annexure X

Rail Vikas Nigam Ltd.

Vallarpadam Idapalli (New Line) Project

Final Report
Volume 2: Financial Analysis & Structuring
July 2004
IDFC
Infrastructure Development Finance Company Limited,
3rd Floor, ITC Centre,
760 Anna Salai,

Chennai 600 002

CONTENTS
1
1

BACKGROUND
1.1

Project Assignment

1
1.2

Scope of Work

2
4

PROJECT BACKGROUND
2.1 Project Rationale

4
2.2 Project Location
5
2.3 Salient Project Parameters
6
2.4 Total Project Cost Estimate (Firm and Non-Firm Cost)
6
2.5 Implementation Schedule
8

3
9

FINANCIAL ANALYSIS
3.1 Methodology

9
3.2 Capital Cost Assumptions
9
3.3 Means Of Finance Assumptions
11

3.4 Operating Cost Assumptions

12
3.5 Container Tarif
13

4
15

FINANCIAL MODEL-SPV Format

4.1 Tornado Analysis

15
4.2 Statistical Analysis
17
4.3 Conclusions Of Financial Analysis, SPV Format
18

5
19

FINANCIAL MODEL-Railway Format

5.1 Comparison with the PETS Report

20

6
22

PROJECT IMPLEMENTATION OPTIONS

6.1

Construction Contracts

6.2

O&M

23
23

7
24

CONCLUSION

8
25

LIST OF ANNEXURES
Annexure I: Implementation Schedule

I
Annexure II: Projected Financial Statements (Truncated) SPV Format
II

Annexure III: Projected Financial Statements (Truncated) Railway

Format
III
Annexure IV: IRR Calculations SPV Format
IV
Annexure V: IRR Calculations Railway Format
V

1
1.1

BACKGROUND
Project Assignment
Vallarpadam Idapalli New Line project is a port-connectivity
project being assessed by Rail Vikas Nigam Limited (RVNL)
for possible implementation under the National Rail Vikas
Yojana.

RVNL (further referred to as the Client) has commissioned

Infrastructure Development Finance Company (IDFC) in
association with BARSYL (further referred to as the
Consultants) for reviewing financial viability and bankability
of the proposed new BG rail line from Idapalli (near
Ernakulam) to the proposed International Container
Transshipment Terminal (ICTT) at Vallarpadam. The scope of
Consultants work and the major tasks that have been
carried out for the purpose of study are outlined in the
following section.
1.2 Scope of Work
1.2.1
PART A Technical Marketing Study
The Consultants were to review the design, procurement,
and construction program and assess the reasonableness of
the cost estimates made by Indian Railways, as part of the
preliminary technical study for the Projects. The scope of
study included:
1) Ascertaining the reasonableness of the project cost
estimates.
i)
Commenting on the methodology of cost estimation
of different elements of the project
ii)
Identifying firm and non-firm costs and the likely
variation in these
iii) Identifying any uncovered or under estimated cost
and likely estimates for the same
iv) Determining contingency provision or assessing the
adequacy of the contingency provision
v)
Assessing the reasonableness of the project cost and
where possible comparing the same with similar
projects executed domestically
vi) Reviewing the procurement and construction
program
vii) Suggest possible reductions in project cost
2) Assessment of cargo/ passenger traffic.

i)

Broad analysis of past cargo and passenger traffic

trends in the region including trends including trends
in cargo and passenger profile
ii)
Independent assessment of the potential market for
the project in terms of cargo/ passenger profile,
projected growth rates, likely market share vis--vis
competing facilities in the region
iii) Interviews with some select large users to elicit
responses on expectations of service levels and
suitably of the project to meet their requirements
iv) Assessment of the hinterland connectivity through
port (if any) and road linkages and adequacy of the
same to meet the projected throughput levels
v)
Assessment of the total cargo / passenger handling
capacity of the existing infrastructure and
recommend additionalities, if required, to meet the
throughput projections
3) Review of the O&M arrangements proposed for the
Projects
4) Review of adequacy and reasonableness of all associated
infrastructure and other support arrangements necessary
for the Projects
5) Assess the need for appropriate disaster/contingency
plan for the Projects to manage the risks identified
The details of the Technical and Market Review are given in
the Volume I of the report.

1.22

PART B Feasibility Study and Finalization of

Project Implementation Structure & Financial Plan

The Consultants were to carry out a feasibility study to

establish the financial viability of the Project to enable its
functioning as an independent, commercially viable entity to
be implemented either through BOT, SPV or any other
project structure & its associated financing mechanism.
Specifically, the Consultant would:
(a)
Undertake a detailed financial
analysis based on the findings of
Part A of the
study (overall cost and revenue estimation).
(b)
Recommend appropriate financing
mix for each of the projects
(c)
Study and evaluate alternate project
structures and
Recommended the preferred implementation
structure based on
Project economics

2.1

PROJECT BACKGROUND
Project Rationale
Indian Ports are currently not geared for handling large
container ships of 6000 TEU, and are therefore serviced by
feeder ships being transshipped from major regional Ports
such as Colombo, Singapore, Dubai. Colombo acts as a
transshipment hub for about 70% of the Indian container
traffic. In the current port capacity scenario, various ports
in India are attempting to undergo major expansion in
container handling capacity, as well as to directly handle
large container ships.

Cochin port region also has the potential to develop as a

hub port in the Indian context, being the only major port
in India , that enjoys the geo-strategic advantage of being
located closest (under 20 Nautical Miles) to maritime route
connecting Far East and Australia with Europe. Prime
Minister of India had expressed the commitment in
January 2001 for establishing an International container
terminal at Cochin.
In this scenario, the Cochin Port Trust (CPT) has identified
Vallarpadam1, an island adjacent to the Cochin Port, as the
prospective location for the proposed International
Container Transshipment Terminal (ICTT). The CPT has
decided on this location on the basis of land availability of
about 5 sq. km, and with the scope to reclaim another 4
sq. km. Cochin port Trust has also taken up the work of
connecting Vallarpadam with main land by a road.
National Highways Authority of India (NHAI) has prepared
a project report to provide a road connection, which will
pass through the outskirts of the city area and link NH17
and NH47. The proposed road will also be connecting
NH49 through NH17 /NH47.
Cochin Port Trust had thus approached Southern Railway
for rail connectivity to Vallarpadam. Southern Railway has
done the Preliminary Engineering cum Traffic Survey
(PETS) for a new railway line from Vallarpadam to Idaplli
along with updating the earlier PETS Report for a new BG
line from Idapalli to Guruvayur, to enhance mainline
capacity to handle the additional traffic that the Port
expansion would generate.
Environmental and Flying funnel clearance have also been
obtained by CPT. In addition to the above, CPT has taken
the initiative to get in principle approval to declare

Vallarpadam area as a Port Based Special Economic Zone

(PBSEZ) to facilitate tax concessions and fast track
clearance to the prospective investors.
1

Additional details on the Proposed Port expansion project are given

in the section on Market Study

14 Expressions of Interest were received, including from

PSA (Singapore), P&O, Maersk, Dubai Ports International
(DPI), IL&FS + Punj Lloyd. The selection process has since
been completed, with the project being awarded to DPI,
the port management and consultancy division of Dubai
Ports Authority (DPA), within in turn is a 100% subsidiary
of the Government of Dubais (100% controlled) company
Ports, Customs and Free Zone Corporation (PCFC).
From the above, it is clear that the development of the
new facility is being mile-stoned against actual build-up of
container traffic.
2.2

Project Location
The proposed line lies in Ernakulam District of Kerala
state. The proposed line will be parallel to the existing line
from Idapalli Station up to Ernakulam Goods Station in the
approximate East-West direction.
The proposed rail line will be connecting the proposed
ICTT at Vallarpadam with Idapalli Railway station. The
alignment traverses from 5.49 m above Mean Sea Level
(MSL) at Idapalli Railway Station and rises to maximum of
13.0 m above MSL at National waterway No. 3 at Km 6.7
and reaches Vallarpadam at +3.0 m above MSL. There is
no important river crossing up to Ernakulam goods station

and the alignment crosses National waterway No. 3

between main land and Vallarpadam.
2.3

Salient Project Parameters

The following parameters are to be adopted for works to
be carried out for the proposed project:
Length 8.5 Km.
Gauge 1676 mm Broad Gauge Main Line Standard
Number of tracks Single
Maximum Speed 100 Kmph
Type of Signaling System MACL Signals of
Standard III
Traction System Electric, 25 KV AC Traction
Number of Bridges / Tunnels 8 Bridges, No
tunnels. Construction of new major bridge from
Ernakulam goods to Vallarpadam across National
Waterway No. 3
Number of other major technical works 4 level
crossings
Ruling Gradient 1 in 100
Maximum degree of curvature 6 degree
Width of formation in Bank 6.85 m
Side Slope 1 : 2
The power lines and telegraph lines shall be shifted
to accommodate BG line wherever required for
electrification of 25 KV AC
There is no improvement required to station
building at Idapalli. Minimum staff quarters are
proposed at Idapalli. One cabin is proposed at
Vallarpadam to function as station building.

2.4
Total Project Cost Estimate
(Firm and Non-Firm Cost)
The Total Project Cost estimate including firm and non-firm
cost is summarized in the table below:

Sl. No. Item

Amount
(Rs. Crores)

As part of
assessing the
91.53
bankability of the
2.16
proposed railway
3
3.57 line
connecting
97.26 Vallarpadam with
B
Idapalli, the
4
4.86
Consultants have
5
0.14
6
0.46 undertaken a
5.46 review of the
102.72 traffic, which has
been detailed in Section 5, Traffic Review of Volume 1: Technical &
Marketing Review for the project. The Consultants have used a
statistical macro-economic model, to arrive at forecasts for the
ICTT and connecting railway line for low, base and high scenarios.
A
1
2

Firm Cost
Civil Engineering
Signaling &
Telecommunication
Electrical & OHE
Total Firm Cost
Non- firm Cost
Contingency provision
KRCL Capital Cost
Misc. Items
Total Non-Firm Cost
Total Project Cost

However, during the meeting with Cochin Port, CONCOR,

RVNL and DPI on
20th May 2004, it was decided that since DPI was the
successful bidder for the development of ICTT, and
assuming responsibility for the development of the Port,
DPIs traffic analysis may be used for the project
assessment. The following table gives the traffic projections
for the project line. The number of trains per day is
calculated on a 330 day year, with 80 TEU per train, and
given in the following table:
Year

Low Case

Base Case

High Case

Potential
Trains Per Potential Trains Per
rail traffic
Day
rail traffic
Day
(1000 TEU)
(1000 TEU)
2005
2006
2007

27
32
37

1.03
1.21
1.41

28
37
46

1.05
1.39
1.73

Potential
rail traffic
(1000 TEU)
30
42
55

Trains
Day

1.12
1.61
2.09

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025

2.5

3
3.1

43
64
76
91
112
136
161
182
206
233
250
269
289
311
334
359
386
415

1.65
2.43
2.89
3.45
4.23
5.15
6.1
6.89
7.79
8.81
9.47
10.18
10.94
11.76
12.65
13.6
14.62
15.72

57
86
106
128
158
192
235
269
310
352
378
407
437
470
505
543
584
628

2.15
3.26
4
4.86
6
7.27
8.89
10.2
11.76
13.33
14.33
15.4
16.56
17.8
19.13
20.57
22.12
23.79

76
119
150
187
237
292
352
404
466
528
567
610
656
705
758
814
840
840

Implementation Schedule
As per the PETS Report, the implementation period for the
project is 3 years. As per the Consultants review, this 3year period of implementation seems to be reasonable.
However, the construction of a long bridge over the creek
is a critical activity.

FINANCIAL ANALYSIS
Methodology
The project cost, the O&M cost and the traffic projections
provided in the Volume 1: Terminal and Marketing Review
Report of the project form the basic inputs for the financial
analysis for the project. A financial model has been
developed for the project, which is based on these
assumptions, as well as other revenue and expenditure
assumptions that are needed to complete the model. The

2.87
4.5
5.69
7.1
8.96
11.0
13.3
15.3
17.6
19.9
21.4
23.1
24.8
26.7
28.7
30.8
31.8
31.8

summary methodology is discussed in the following

sections.
3.2

Capital Cost Assumptions

The Capital cost is taken as assessed in the Technical
Analysis. The major heads under which cost is assessed are:
(a)
There is a provision in the model to
incorporate costs that have already been incurred
on the project, as distinct from costs that have yet
to be incurred. The provision has been kept since
some of the project(s) have already been
commenced, and costs have been incurred. These
incurred costs have been divided into two
catagories as cost of Land, and Other Capital
Costs. Land has been segregated in order to
handle the depreciation provisions properly- land
not being a depreciated asset. However, in this
Project no costs have been incurred so far, and the
construction would be of a green-field nature.
(b)
The Capital Costs yet to be incurred are
divided into the following heads:
Lands:
KRC Capital Cost: This head includes
additional civil and communication costs that
need to be incurred in order to lower the
man-power costs during O&M. This being
similar to the KRCL Operating standards, has
been named under that terminology.
Total Cost of Civil:
Cost of S&T:
Cost of Electrical:
While these costs are clearly determined from
the Technical and Cost appraisal, there is an
additional set of costs incurred if projects have

to be implemented on a commercial format.

These costs are described below:
Contingencies: The provision for
contingencies in the cost estimates has been
taken as 1%. In commercially financed
projects, all funds have to be tied before
project commences, and there is little
possibility of raising funds during the course
of the project. Contingency provisions have to
be higher than in the normal government
funded projects where additional budgetary
provisions can be made during the course of
the project implementation.
Interest during construction (IDC): This is
cost of debt funds from the date of first draw
down, till the project commences commercial
operations. IDC is added to capital cost.IDC is
determined under the financial model by a
convergent iterative process, since it gets
added back to the Project Cost and has then
to be financed.
Syndicating fees as a percentage of RTL:
Typing up equity / debt funds usually involves
syndication fees charged by the merchant /
investment bankers. This syndicating fees is
an up-front fee charged at financial closure,
and is added to the cost of capital. This has
been assumed at 1% of the equity / debt
syndicated.
Upfront fees to Lenders as a percentage
of Debt syndicated: Lenders charge upfront fees as a percentage of debt sanctioned.
Normally this is to be paid before financial

closure, and is added to capital cost. This has

been assumed at 0.5% of the debt financed.
DSRA to be funded: Depending on the
viability of the project, and the ability of the
project to repay debt, there may be
requirement from the Lenders to hold a Debt
Service Reserve Account (DSRA). DSRA can be
either created from project cash-flows or be
funded up-front. In the latter case they form
part of the projects capital cost. Given the
nature of the Project, it has been considered
prudent to incorporate a DSRA provision into
the Project. The DSRA caters to 6 months (2
quarters) of debt service in the initial years,
and is funded, which means that the cash in
the DSRA is raised as a part of the initial
Project Cost.
The Financial Model has a provision for including these
costs at the option
of the analyst.
3.3
3.3.1

Means of Finance Assumptions

Debt-Equity Ratio
If the project is implemented by Government funds, no
structuring of the source of funds is required. However, in
the event that funds have to be raised from commercial
sources, there would be an appropriate mix of debt and
equity. Government projects would be akin to those fully
funded by equity. The financial model developed has a
provision for switching between three modes of finance by
specifying a Debt-Equity Ratio (DER) of any desired
number (Zero being the case of a complete equity model).
DER would typically vary between 0.5 and 1.5, depending

on the project. However, the financial analysis for this project

indicates that it cannot support any commercial debt. Based
on the financial analysis, it has been assumed that the project
is completely funded by equity/grant.

3.3.2

Quasi-Equity or Viability Gap Funding

A part of the project funding may have to come in a soft
form, as quasi-equity or subordinated debt, as what is
commonly known as Viability Gap Funding. This may be
required to make the Project viable and/or being able to
service its debt. While these funds can technically come into
the project at any point when they are needed, there are
clear reasons why the funds are generally brought into the
project up-front.
To reduce the IDC, and thereby Project Cost
As a measure of credibility, since the leaders
may insist that these funds are brought in before
debt

3.3.3

Sequence of Funding
Funds are brought into the project in the following order:

i.
Quasi-equity/ Viability Gap Funds
ii.
Up-front equity
iii. Debt
iv. Balance Equity and Debt
3.3.4
Terms Of Debt
The project is assumed to be completely funded by equity /
grant, and no debt has been assumed.
3.4
Operating Cost Assumptions
The calculation of O&M cost has been done on two bases for
the project. The first is on a fully recovered cost basis and
the second on a fully distributed cost basis. The details of
the assumptions and calculations are given in Volume 1 of
the report.
3.4.1
O&M Costs Fully Recovered Basis

3.4.1.1 Staf Cost

The staff cost estimated for 3 different volume of traffic is
summarized in the table below:
(in Rs. Lakhs)

Scenario
Low Case
Base
Case
High Case

Base
Year
2002
47.67
49.58

3.4.1.2 Material Cost

50.53
The material
cost estimated for the
project is Rs. 14.20 Lakhs per annum (Base year 2002) the
all the scenarios of traffic.
3.4.1.3 Variable Cost
The variable cost estimated for the project is Rs. 31.06
Lakhs per MTPA (Base year 2002).
3.4.2
O&M Costs Fully Distributed Basis
Working Expenses, Freight for 1000
TEU over 346 km lead
Marshaling
Line Haul (Electric)
Line Haul - Other Transportation Services
Line Haul - Track and Signaling
Overheads
Central Charges
Escalation
Total (Rs. per 1000 TEU lead by 343 km)
UNIT - per TEU per km
UNIT - per MT per km

Amount
(Rs. )
191,550
647,401
290,368
334,327
407,040
10,102
288,325
2,169,111
Rs. 6.27
Rs. 0.45

3.5

Container Tariff
The assessment of Container Tariff requires certain
assessments about the movement of containers from the
Proposed Terminal. The following reasonable assumptions/
data have been adopted by the Consultants after
discussions with the Southern Railway and CONCOR.

Containers
Ratio Domestic to
International
Ratio 'W' to Total
Ratio of Concor to Total
Ratio Loaded to Total on
Imports
Weight of 'W' (Tons)
Weight of 'M' (Tons)
Weight of Empty (Tons)

10%
50%
100%
50%
19.75
27.5
2.5

To obtain a Weighted
Tariff, an assumption has been made that 100 TEU are
moved by a distance equivalent to the average lead from
the Port, as obtained from data of Southern Railway. The
Tariff data obtained from CONCOR is placed into the matrix
to get a weighted tariff rate that is used in the financial
model.

Quantity
(TEU)
Total TEU
Domestic 'W' CONCOR
Domestic 'M' CONCOR
International CONCOR
Empty CONCOR
Check Field
Conversion of TEU to
Tons

100
2.5
2.5
90
5
100

14.9

Tons

49.38
68.75
1,777.50
12.5
1,908.13

Lead
(Km)
346
346
346
346
346

Weighted Tariff

Tariff
(Paise)
780
835
670
575
672.13

45.10
Paise/
Km/ Mt

FINANCIAL MODEL SPV Format

A financial appraisal-type model has been used to carry out

the financial analysis. The model is front-ended by a

proprietary program that can identify the key variables, and

carry out a probabilistic analysis of these key variables.
Two different analyses have been carried out for the project
financials:
(i) For the project SPV, considering all costs and
revenues only for the project distance of 8.5 km, with
operational costs on a fully recovered costs basis.
(ii)
For the railway network, assuming an
average lead of 346 km, and the revenues for that
distance, with operational costs on a fully
distributed cost basis.
Other than the assumptions highlighted in the earlier
sections, the model uses a standard system for generating
the various cash flow, profit and loss, and balance sheet
statements. Various project finance parameters such as
Debt Service Coverage Ratio (DSCR minimum and
average), Project Internal Rate of Return (IRR), Equity IRR,
Net Present Value (NPV), Project Life Coverage Ratio (PLCR),
and Loan Life Coverage Ratio (LLCR) are also determined.
This first section discusses the project on an SPV format
with fully recovered costs.
4.1

Tornado Analysis
The Tornado Analysis generates the variation in
critical variables for a given set of Low-High-Base
assumptions. Based on these results, the critical Key
variables are identified.
The variables that have been chosen for being tested
include:
(i) Project Cost Sensitivity
(ii)
Traffic Growth Scenario (Low, Base and
High)
(iii) Tariff Growth Scenario (Low, Base and High)
(iv)Fixed and Variable Operating Expenses

(v) Percentage reduction in initial traffic after

Commencement of Commercial Operations, for
ramping up gradually
The effect of these key variables is exclaimed on three
critical parameters.
1. NPV Of Earning Before Interest, Depreciation, Taxes
and Amortization (EBIDTA) which shows the Net
Operational Revenues of the Project (Operational
Earning less Operational Expenses)
2. Project NPV at 10% discount rate. Since IRR is negative
in most of the statistical cases, it is not a useful value
measure for this project.
4.1.1

Project NPV
For the given variations in the key parameters, the Project
NPV has a base value of Rs. (-) 104 Crores, and varies from
(-) 115 Crores to (-) 98 Crores in the high and low case. The
parameter appears most sensitive to the Tariff Growth
Scenario, and Goods Traffic Growth Scenario. The other
variables do not impact it much.

4.1.2

NPV of EBITDA
This parameter is being used to aggregate the year-on-year
Operational Income. This parameter is important in this
project, since in most of the scenarios, the Operating Cash
Flows turn negative, and lead to a situation where the
project cannot sustain debt. For the given variations in the
key parameters, the NPV of the EBITDA varies between Rs
(-) 12 Crores in the Base Case, to Rs. (-) 5 Crores and Rs. (-)
22 Crores. A negative value indicates that the Project is
unable to generate any income even for its operations
alone. The parameter appears most sensitive to the Goods
Traffic Growth Scenario, and other variables do not impact it
much.

4.1.3

Conclusions of Tornado Analysis

The Tornado Analysis indicates that the parameters that
have the most impact (or in other words, to which the
Project is most sensitive) are the Goods Traffic Scenario, and
the Tariff Growth Scenario.
The Goods Traffic Scenario incorporates the analysis
set out in Volume 1 of this report, for assessing the
Low, Base and High Case Traffic forecasts.
The Goods Tariff Scenario incorporates the assumption
on the increase in Freight Tariffs. Considering the
Freight Tariffs in India are already very high, a Low
Case assumption has been made that the revision in
the Freight Tariffs will be only to the extent of half the
Wholesale Price Index. Since the Operating Costs have
been assumed to escalate at the WPI, this leads to a
situation where the Freight Revenues are outstripped
by the Operating costs during the tenure of the Project.

4.2

Statistical Analysis
From the Tornado Analysis the three critical parameters to
which the Project is sensitive are found to be the Traffic and
Tariff Growth Scenarios, as well as project cost sensitivity.
However, given the fact that the project is not robust even
in the base case, the statistical analysis results have not
been presented.

4.3

Conclusions of Financial Analysis SPV Format

The Financial Model and the Tornado Analysis indicate the
following:
The Project appears unable to service its capital, and
in fact is barely able to meet its operational expenses.
The reasons for this are the following:

o A very high project cost of over Rs. 100 Crores

for an 8.5 Km line, amounting to over Rs. 12
Crores per km.
o Operational Costs being high in comparison to
the revenues: Effective revenues are of the
order of Rs. 0.45 per ton per Km, while
variable operational costs alone (apart from
fixed costs) are of the same order (0.39 per
ton per km). In this condition, there are no
operating surpluses to generate debt service
ability and rturns on investment.
The crux of the project appears to be the need to
properly capture the traffic, and bind the users with
suitable agreements to move the committed traffic. If
this is done, the critical issue of traffic shortfall can be
addressed, and one can work with a High-case traffic
scenario. On the periodic revision of Freight tariff, the
project has no control. Therefore suitable assumptions
will need to be made in the business plan, and the
same possibly domiciled into the Concession
Agreement with the Railways.

FINANCIAL MODEL Railway Format

During discussions with the Cochin Port Trust, the financial
viability of the project line under an SPV format was
discussed. One of the main reasons for the lack of viability is
that a very high project cost of over Rs. 100 Crores for an
8.5 Km line, amounting to over Rs. 12 Crores per km. There
was a strong opinion that taking the 8.5 km project length is
not a proper representation, since the traffic travels over a
certain designated lead, and therefore the revenues are
generated over that designated lead.

It was therefore decided to carry out a financial analysis for

the entire designated lead, taking the capital costs,
revenues and operating expenses for the project line.
To carry out this analysis, the following assumptions are
made, based on the data given in the Indian Railway
Statistical Year Book 2003 and Summary of the end
results Freight Services Unit Costs, 2001-2002,
Directorate of Statistics & Economics, Ministry of Railways:

Average lead has been assumed based on the

statistical data for analysis, at 346 km 2
Operating expenses are taken as given in the
previous section on O&M Costs on a fully distributed
costs
Revenues are taken for the entire average lead
The issues with this approach can be seen by just examining
the tariff and fully distributed expenses as per Southern
Railway statistics. As indicated in the previous sections, the
tariff is Rs. 6.72 per TEU per km (Section 3.5, Container
Tariff), while the fully distributed costs are Rs. 6.27 per TEU
per km (Section 3.4.2, O&M costs, fully distributed basis).
The ratio of operating expenses vs. operating income for the
project is thus 93%, which may be compared to the ratio
given in the Annual Statistical Statements (2002) Table 7,
given as 112% (1.12).
The results tabulated below, show that the project has a
marginally negative value of the enterprise NPV at 10%, but
a positive EBITDA which indicates that the project is able
to sustain the operational expenses from its operational
revenues.
Parameter
NPV (Enterprise) Rs. Crores
@ 10%
NPV of EBITDA, Rs. Crores @
10%
Project IRR

Low Case Base Case High Case

Traffic
Traffic
Traffic
(-) 38

(-) 20

64

87

118

6.72%

8.33%

10.30%

5.1

Comparison with the PETS Report

The PETS Report (pp-49, Financial Appraisal chapter) worked
out an IRR of 9.966% for the project line. The key
differences in the PETS Report and in the current analysis
are highlighted in the following table

Working Expenses, Freight

2

Unit

As per the

As per

This lead should ideally be worked out based

on a detailed O&D
present
PETS
assessment
analysis
Report

Marshalling

per wagon
per yard
Provision & Maintenance of per wagon
PETS Report
Wagons
per yard
Line Haul (Electric)
per 1000
GTKM
Line Haul - Other
per 1000
Transportation
GTKM
Services
Line Haul - Track and
per 1000
Signaling
GTKM
Overheads
Central Charges
Escalation

383.1

310.1

151.12

172.89

71.28

71.53

31.97

30.64

36.81

34.28

27.81%
0.54%
15.33%

26.24%
0.61%
15.33%

33.29

45.94

Present Analysis

Unit expenses per TEU, for a lead of

9 km, as assumed in PETS Report

Remarks

Parameter
Traffic

4,26,000 TEU on rail 1,28,000 TEU in

in
year
year 2011
2011

PETS relied on the old FRH Repor

traffic, which was much higher

Tariff

O&M
costs

Rs. 9.25 per TEU

per km

Rs. 6.72 per TEU

per km

The figure of Rs. 9.25 per TEU pe

km is
for international containers on
railway
wagons. However, the traffic at
the port
will consist of domestic and
international
containers, empty and loaded,
and 'W'
and 'M' class. The present
analysis has
taken an appropriate mix rather
than a single-point tariff.
CONCOR wagons have been
assumed, given the scenario a
few
years from now.
Taking a 9 km lead, Taking a 9 km lead, Comparison of the O & M cost
the
the
aasumptions in the present
unit operational
unit operational
report,
cost for
cost for
moving 1 TEU is Rs. moving 1 TEU is Rs. with the PETS is given in the
45.94
33.29
following
table

(in Rs. )

PROJECT IMPLEMENTATION OPTIONS

The objective of undertaking a feasibility study for the

project is to establish the financial and commercial viability
of the Project to enable its functioning as an independent
and commercially viable entity. The Vallarpadam Idapalli
Port connectivity project (New Line) has been identified for
development under the National Rail Vikas Yojana (NRVY).
Under the Yojana, which is a non-budgetary initiative of the
Government of India, the project would be implemented
with market and private sector participation through equity
and debt route.

In the recent past, two models have been evolved for

implementation of rail projects with private sector
participation in the country. The first model is of the Pipavav
Rail Corporation Limited (PRCL), which is a 50 : 50 joint
venture between the Ministry of Railways and Gujarat
Pipavav Port Limited (GPPL). This project has been
operational over the recent past. The second model is that
of the Hassan-Mangalore Rail Development Corporation
Limited (HMRDCL), which is jointly promoted by the Ministry
of Railways and the Government of Karnataka, with equity
participation by Strategic Investors like the New Mangalore
Port Trust and a few iron-ore exporters based in the HospetBellary area.
However, given that the viability of the Project does not
appear to be established, it is suggested that the project be
taken up on a cost-sharing basis between the Railways,
Cochin Port Trust and the ICTT project company. The project
financials do not appear to justify the existence of a
separate project SPV.
As seen from the Financial Analysis, the materialization of
the Traffic Forecast is of paramount importance to the
Project. This can be ensured only if (a) The ICTT Project
supports it, and (b) Proposed Users enter into firm take-orpay type arrangements.
The Project seems able to support the Operational Costs
and could therefore carry out the Operation and
Maintenance function, without recourse to any other
support.
6.1

Construction Contracts
Since there are long bridges proposed in the section, it
would also be appropriate if the construction contracts were

awarded on a Lump-sum, Fixed Price, Turn-key (LSTK)

basis to avoid delays and escalation. The Project cost needs
to be reworked after detailed engineering, and suitable
contingency provisions made.
6.2

O&M
Operation and Maintenance would be carried out by the
concerned Railway division.

7 CONCLUSION
The development of ICTT at Vallarpadam is the raison-deetre for the development of this Railway project. Traffic
projections and growth patterns made for the Port are based
largely on an assessment of diversion of Container Traffic
destined to the assessed hinterland of Cochin.
The Financial Analysis shows that the Project is not
financeable through a routine mixture of debt and equity.
The Project financial analysis does not support such a
position. However, the Project does appear to be able to
meet its operational expenses from the revenues it
generates.
The Project is not being proposed as a stand alone and
financially viable Railway Project, but is a critical
connectivity link for the proposed ICTT at Vallarpadam. The
cost of the Project id high since the cost of Land and Bridges
is disproportionately large to the length of the line.
However, looked at in the context of the cost of establishing
a new Container Transshipment Terminal, the cost of the
new line is a small fraction. The implementation structure
proposed in the previous section, is therefore on a costsharing basis among the various entities involved namely

the Railways, the Cochin Port Trust, and the ICTT project
company.
The traffic assumptions are extremely critical. Entering into
proper and binding agreements with the proposed Users can
mitigate this risk.
Given the fact that the Project poses engineering challenges
in the form of long bridges etc., it is imperative to get a
proper fix on the cost, contingent provisions and time-lines
for construction. Lump sum, fixed-price turnkey construction
contracts with a short listed set of competent contractors, is
recommended. The O&M services would remain with the
Railways.

LIST OF ANNEXURES

Implementation Schedule
o Annexure I
Projected Cash Flow, P&L and Balance Sheet
(Truncated) for SPV Format
o Annexure II
Projected Cash Flow, P&L and Balance Sheet
(Truncated) for Railway
Format
o Annexure III
IRR Calculations SPV Format
o Annexure IV
IRR Calculations Railway Format
o Annexure V

Annexure I: Implementation Schedule

VALLARPADAM IDAPALLI (NEW LINE

PROJECT)

Annexure II: Projected Financial Statements (Truncated)

SPV Format
Aii figures
Rs. In crores

111111111111Apr- Apr- Apr- Apr- Apr- Apr- Apr- Apr- Apr- Apr- Apr- Apr05 06
07
08
09
10
11
12
13
15
16
17
31- 31- 31- 31- 31- 31- 31- 31- 31- 31- 31- 31Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar06 07
08
09
10
11
12
13
14
16
17
18
0
0
0 0.53 0.74
1 1.28 1.62 2.07 2.95 3.48 3.89

Profit &
Loss
Statement
Total
Revenues
Total
0
Working
Expenses
EBIDTA
0
Depreciation 0.19
EBIT
0.19
Interest
0
EBT
0.19
Tax
0
PAT
0.19
All figures
Rs. In crores
Cash Flow
Statement
Cash Inflows 31Mar06
PAT
0.19
Depreciation 0.19
Quasi equity/
0
Gap funding
Equity
32.2
infusion
3
Debt
0
Inflows into
0
DSR A/c
Total Cash
32.
Inflows
23
Cash
Outflows
Capex
32.2

0 1.54 1.79

2.1 2.43 2.82 3.32 4.31 4.91 5.38

0
0 -1.01 -1.05 -1.1 -1.15 -1.2
0.91 2.18 2.57 2.57 2.57 2.57 2.57
- -2.18 -3.58 -3.62 -3.67 -3.71 -3.76
0.91
0
0
0
0
0
0
0
0.91 -2.18 -3.58 -3.62 -3.67 -3.71 -3.76

-1.25 -1.36 -1.43 -1.49

2.57 2.57 2.57 2.57
-3.82 -3.93 -3.99 -4.05
0
0
0
0
-3.82 -3.93 -3.99 -4.05

0
0
0
0
0
0
0
0
0
0
0
- -2.18 -3.58 -3.62 -3.67 -3.71 -3.76 -3.82 -3.93 -3.99 -4.05
0.91

31- 31- 31- 31- 31- 31- 31- 31- 31- 31- 31Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar07
08
09
10
11
12
13
14
16
17
18
- -2.18 -3.58 -3.62 -3.67 -3.71 -3.76 -3.82 -3.93 -3.99 -4.05
0.91
0.91 2.18 2.57 2.57 2.57 2.57 2.57 2.57 2.57 2.57 2.57
0
0
0
0
0
0
0
0
0
0
0
23.6 46.8
2
7
0
0
0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

23. 46.8
62
7

23.6 46.8

3
0

2
0

7
0

Loan
Repayment
Outflows
0
0
0
from DSR A/c
Total Cash
32. 23. 46.8
Outflows
23 62
7
Opening
Cash
Balance
Net Cash
Flows
Closing Cash
Balance
cf -ve
Balance
Sheet
Liabilities
Equity

0 -1.01 -2.07 -3.17 -4.31 -5.51 -8.07 -9.44

0 -1.01 -1.05

0 -1.01 -2.07 -3.17 -4.31 -5.51 -6.76 -9.44

BS Check
BS OK

10.8 12.3
6
5

31- 31- 31- 31- 31- 31- 31- 31- 31- 31- 31- 31Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar06 07
08
09
10
11
12
13
14
16
17
18
32.2 55.8 102. 102. 102. 102. 102. 102. 102. 102. 102. 102.
3
5
72
72
72
72
72
72
72
72
72
72
0
0
0
0
0
0
0
0
0
0
0
0

Railways
quasi equity
Reserves &
- -1.1 -3.28 -6.86
Surplus
0.19
10.4
8
IDFC Debt
0
0
0
0
0
Total
32. 54. 99.4 95.8 92.2
Liabilities
04 75
3
6
4
Assets
Net Fixed
32.0 54.7 99.4 96.8 94.3
Assets
4
5
3
7
DSR Account
0
0
0
0
0
Cash & Bank
0
0
0 -1.01 -2.07
Total
Assets

-1.1 -1.15

10.8
6
-1.2 -1.25 -1.36 -1.43 -1.49

- 21.6
14.1 17.8
2 25.4 33.2 37.2 41.2
5
6
4
4
3
8
0
0
0
0
0
0
0
88.5 84.8 81.1 77.2 69.4 65.4 61.4
7
6
8
8
9
3

91.7 89.1 86.6 84.0 78.9 76.3 73.7

4
7
1
4
1
5
8
0
0
0
0
0
0
0
-3.17 -4.31 -5.51 -6.76 -9.44
10.8 12.3
6
5
32. 54. 99.4 95.8 92.2 88.5 84.8 81.1 77.2 69.4 65.4 61.4
04 75
3
6
4
7
6
8
8
9
3
0

Annexure III: Projected Financial Statements (Truncated)

Railway Format

All figures
Rs. In crores

1111Apr- Apr- Apr- Apr05 06

07
08
Profit &
31- 31- 31- 31Loss
Mar- Mar- Mar- MarStatement
06 07
08
09
Total
0
0
0 21.5
Revenues
1
Total Working
0
0
0 20.0
Expenses
6
EBIDTA
0
0
0 1.45
Depreciation 0.19
EBIT
0.19
Interest
0
EBT
0.19
Tax
0
PAT
0.19
All figures
Rs. In crores
Cash Flow
Statement
Cash Inflows 31Mar06
PAT
0.19
Depreciation 0.19
Quasi equity/
0
Gap funding
Equity
32.2
infusion
3
Debt
0
Inflows into
0
DSR A/c
Total Cash 32.2
Inflows
3
Cash
Outflows
Capex
32.2
3
Loan
0
Repayment
Outflows
0
from DSR A/c
Total Cash 32.2
Outflows
3
Opening
Cash
Balance
Net Cash
Flows
Closing Cash
Balance
cf OK

11111Apr- Apr- Apr- Apr- Apr09

10
11
12
13
31- 31- 31- 31- 31Mar- Mar- Mar- Mar- Mar10
11
12
13
14
30.0 40.7 52.3 66.0 84.1
1
4
9
3
27.9
38 48.7 61.6 78.4
9
8
5
7
2.02 2.74 3.52 4.45 5.66

1Apr15
31Mar16
120.
04
111.
96
8.07

1Apr16
31Mar17
141.
75
132.
22
9.54

1Apr17
31Mar18
158.
31
147.
66
10.6
5
0.91 2.18 2.57 2.57 2.57 2.57 2.57 2.57 2.57 2.57 2.57
- -2.18 -1.12 -0.55 0.18 0.95 1.88 3.09 5.51 6.97 8.08
0.91
0
0
0
0
0
0
0
0
0
0
0
- -2.18 -1.12 -0.55 0.18 0.95 1.88 3.09 5.51 6.97 8.08
0.91
0
0
0
0 0.01 0.08 0.16 0.26 0.45 0.58 0.67
- -2.18 -1.12 -0.55 0.16 0.87 1.73 2.84 5.06 6.4 7.42
0.91

31- 31- 31- 31- 31- 31- 31- 31- 31- 31- 31Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar07
08
09
10
11
12
13
14
16
17
18
- -2.18 -1.12 -0.55 0.16 0.87 1.73 2.84 5.06 6.4 7.42
0.91
0.91 2.18 2.57 2.57 2.57 2.57 2.57 2.57 2.57 2.57 2.57
0
0
0
0
0
0
0
0
0
0
0
23.6 46.8
2
7
0
0
0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

23.6 46.8 1.45 2.02 2.73 3.44 4.29

2
7
23.6 46.8
2
7
0
0

5.4 7.62 8.96 9.98

23.6 46.8
2
7

0 1.45 3.47 6.19 9.63 13.9 25.7 33.3 42.3

2
2
4

0 1.45 2.02 2.73 3.44 4.29

0 1.45 3.47 6.19 9.63 13.9 19.3 33.3 42.3 52.2

2
3
4
8

5.4 7.62 8.96 9.98

Annexure IV: IRR Calculations SPV Format

IRR
1-Apr- 1-Apr- 1-Apr- 1-Apr- 1-Apr- 1-Apr- 1-Apr- 1-Apr- 1-Apr- 1-Apr- 1-Apr- 1-Apr- 1-Apr- 1-Ap
Calcul
05
06
07
08
09
10
11
12
13
14
15
16
17
1
ations
Project
3131313131313131313131313131
IRR
Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-1
Cashfl
0
0
0
ows
from
ops
Capex 32.23 23.62 46.87
Project -32.23 -23.62 -46.87
Net
Cashfl
ows
Project
IRR
#NUM
!
Equity
IRR
Cashfl
0
0
0
ows
from
ops
Loan
0
0
0
Repay
ment
&
Interes
t
Equity -32.23 -23.62 -46.87
& IR
Quasi
Equity
Free
-32.23 -23.62 -46.87
Cash
Flows

-1.01

-1.05

-1.1

-1.15

-1.2

-1.25

-1.31

-1.36

-1.43

-1.49

-1.5

0
-1.01

0
-1.05

0
-1.1

0
-1.15

0
-1.2

0
-1.25

0
-1.31

0
-1.36

0
-1.43

0
-1.49

-1.5

-1.01

-1.05

-1.1

-1.15

-1.2

-1.25

-1.31

-1.36

-1.43

-1.49

-1.5

-1.01

-1.05

-1.1

-1.15

-1.2

-1.25

-1.31

-1.36

-1.43

-1.49

-1.5

to
Equity
Equity
IRR
#NUM
!

Annexure V: IRR Calculations Railway Format

IRR
1-Apr-05 1-Apr-06 1-Apr-07 1-Apr-08 1-Apr-09 1-Apr-10 1-Apr-11 1-Apr-12 1-Apr-13 1-Apr-14 1-Apr-15 1-Apr-16 1-Apr-17 1-Apr-1
Calculat
ions
Project
31-Mar- 31-Mar- 31-Mar- 31-Mar- 31-Mar- 31-Mar- 31-Mar- 31-Mar- 31-Mar- 31-Mar- 31-Mar- 31-Mar- 31-Mar- 31-Ma
IRR
06
07
08
09
10
11
12
13
14
15
16
17
18
1
Cashflo
0
0
0
-1.01
-1.05
-1.1
-1.15
-1.2
-1.25
-1.31
-1.36
-1.43
-1.49
-1.5
ws from
ops
Capex
32.23
23.62
46.87
0
0
0
0
0
0
0
0
0
0
Project
Net
Cashflo
ws
Project
IRR
#NUM!
Equity
IRR
Cashflo
ws from
ops
Loan
Repaym
ent &
Interest
Equity &
IR Quasi
Equity
Free
Cash
Flows to
Equity
Equity
IRR
#NUM!

-32.23

-23.62

-46.87

-1.01

-1.05

-1.1

-1.15

-1.2

-1.25

-1.31

-1.36

-1.43

-1.49

-1.5

-1.01

-1.05

-1.1

-1.15

-1.2

-1.25

-1.31

-1.36

-1.43

-1.49

-1.5

-32.23

-23.62

-46.87

-32.23

-23.62

-46.87

-1.01

-1.05

-1.1

-1.15

-1.2

-1.25

-1.31

-1.36

-1.43

-1.49

-1.5