Iran may replace Hinduja-led consortium with Chinese firm in rail project

November 9, 2008

Iran has threatened to call off talks with Ashok Leyland Project Services Ltd and sign a contract with a Chinese firm to build a rail link in that country due to differences with the Indian infrastructure company over execution of the project.

The West Asian nation had signed an agreement with a consortium led by Ashok Leyland Project Services, a unit of Ashok Leyland Ltd, the flagship company of the Hinduja Group, for the construction of the 708km Chabahar-Fahraj railway link.
The other members of the consortium for the €1.1 billion rail project include Ircon and RITES Ltd, both subsidiaries of the Indian Railways.
While the consortium favors constructing the project on the build, lease and transfer (BLT) model, the Railway Company of Islamic Republic of Iran wants it to be executed on the build, operate and transfer (BOT) model, said an Iranian government official in the ministry of roads and transportation in New Delhi.
“There is a Chinese company vying for the project. If we cannot solve the problem, we will sign the contract with it. As it is a very important project for our country, we cannot wait for such a long time,” he said asking not be named. He declined to name the Chinese company.
In the BOT model, projects are owned by developers who enjoy rights to earn revenue from an asset over a specified period. In the BLT model, the contractor is paid a fixed amount to build the project by the client, usually in installments.
This is not the first time that a railway project involving Indian firms in Iran has hit a roadblock. Some other Iran projects of Rites have already hit the skids over a dispute over how they would be executed as reported by Mint on 4 November.
The Chabahar-Fahraj railway link aims to connect the country’s railway network to the ocean port of Chabahar. The traffic forecast studies show the line carrying 1.4 million tons of freight and 300,000 passengers in the first year of operations in 2014.
Cargo and passenger traffic are expected to go up by 186% and 67%, respectively, by 2026.