Source: https://economictimes.indiatimes.com/industry/transportation/railways/indian-railways-bidding-rules-may-factor-in-social-development-impact/articleshow/92289608.cms
Publisher: ET
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.
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.
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 poor financial viability but a strong positive impact on the people and surrounding areas.
The MEIRR can be worked out at the project, the 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.
Experts said the latest change aligns the framework to global practices. “The new method is aligned to frameworks used in countries like the United Kingdom and Australia for assessing the economic impact of new projects,” said Arindam Guha, government and public services leader at Deloitte India.
Guha said the new method appears to be more comprehensive as it covers the economic impact of the project on alternate modes of transport like roadways as well as the effect on the existing railways network.
The MEIRR will focus on financial, economic and network approaches for assessing projects. These approaches will rely on conversion of financial cost to economic cost by excluding taxes, subsidies and interest payments, among other factors.
