The Indian Railways has decided to switch from a pure financial return-based assessment of bids for new projects to a more comprehensive approach that includes social and developmental impact.
Officials privy to the radical shift in bidding norms said the Modified Economic Internal Rate of Return (MEIRR) will enable the railways to gauge the economic, social and developmental aspect of a project, allowing the national transporter to take up more projects in far-flung or low density areas.
“We cannot continue to deny railway connectivity to people in certain regions of the country simply because there is no immediate financial return that can be assessed,” a senior railways official told ET on condition of anonymity.
The change was prompted by a growing view within the government that an assessment based purely on the financial rate of return was inadequate and social and developmental needs of a region and its people also needed to be taken into account.
For instance, the new passenger rail projects, such as the Regional Rapid Transit System (RRTS) in the National Capital Region (NCR), are among those that seem to have a poor financial viability but a strong positive impact on the people and surrounding areas.
The MEIRR can be worked out at the project, zonal and national level depending on the impact it creates at different levels. This will be examined in detail before a final decision is made on any investment.
The economic approach will assess benefits derived by comparing user benefits in ‘with project’ and ‘without project’ scenarios. It will take into account savings of travel time, vehicle operating costs, improvement in safety, pollution reduction and reduced road stress. The savings in fuel and developing road infrastructure will also be a parameter for assessment.