MEGA G20 RAILWAYS DEAL: IRCON, RITES, RVNL in focus

The G20 summit in New Delhi is expected to witness a historic announcement of a joint infrastructure deal between the US, India, Saudi Arabia and the UAE. The deal aims to connect the Gulf and Arab countries through a network of railways and shipping lanes, and also link them to India via seaports. This ambitious project will have significant implications for the regional trade, security and geopolitics, as well as for the Indian railway companies that are likely to benefit from it.

Why is this deal important?

The proposed railway deal is part of Washington’s efforts to balance China’s influence in the region, as Beijing has been expanding its Belt and Road Initiative (BRI) across Asia and Africa. China has also boosted ties with the Middle East of late, helping to broker a detente between Saudi Arabia and Iran earlier this year.

The railway deal will also enhance the connectivity and integration of the Gulf Cooperation Council (GCC) countries, which have been pursuing a common vision of economic diversification and regional cooperation. The GCC countries have already invested in developing their own railway networks, such as the Gulf Railway project that aims to link Kuwait, Bahrain, Qatar, UAE, Oman and Saudi Arabia by 2023.

Moreover, the railway deal will create new opportunities for trade and investment between India and the Middle East, which are already important partners in energy, defence and diaspora. India is the third-largest oil importer in the world, and more than 60 percent of its crude oil imports come from the Middle East. India is also home to more than eight million expatriate workers from the region, who contribute to the remittances and cultural ties between the two sides.

Which Indian companies will benefit?

The railway deal will open up new avenues for Indian railway companies that have expertise and experience in executing railway projects in India and abroad. Some of the prominent players in this segment are:

• IRCON International Ltd: A specialised infrastructure construction company that undertakes turnkey projects in railways, highways, bridges, tunnels, flyovers and airport runways. IRCON has completed more than 400 projects in India and over 140 projects across 25 countries. IRCON has also been involved in the construction of railway lines in Iraq, Iran, Algeria, Bangladesh, Sri Lanka and Malaysia.
• RITES Ltd: A consultancy organisation that provides engineering, design, planning and project management services for transport infrastructure. RITES has undertaken projects in over 55 countries across Asia, Africa, Latin America and Europe. RITES has also provided consultancy services for rail networks in the Middle East, such as the Dubai Metro, the Mecca Metro and the Oman National Railway.
• Rail Vikas Nigam Ltd (RVNL): A project execution agency that implements projects to create and augment rail infrastructure capacity on a fast-track basis. RVNL works as a sub-contractor of Indian Railways by getting works on a nomination basis from Railways with no borrowing power of its own. RVNL has executed projects such as the Dedicated Freight Corridor (DFC), the Kolkata Metro Rail and the Delhi Metro Rail.

According to some reports, there is a possibility of merging RVNL into IRCON to avoid duplication of functions and create synergies56. However, this proposal has not been confirmed by the government yet.

What are the challenges?

The railway deal is not without its challenges and risks. Some of the potential hurdles are:

• Political instability: The Middle East is a volatile region that faces various conflicts and tensions among its countries and with external powers. The recent withdrawal of US troops from Afghanistan has also created uncertainty and insecurity in the region. Any political turmoil or violence could disrupt or delay the implementation of the railway project.
• Financial constraints: The railway project will require huge investments from both public and private sectors. The GCC countries have been facing fiscal pressures due to the Covid-19 pandemic and low oil prices. They may have to prioritise their spending on health care, social welfare and economic recovery over infrastructure development. The private sector may also face challenges in raising funds or finding viable business models for the project.
• Technical difficulties: The railway project will involve complex engineering and logistical challenges such as crossing deserts, mountains and seas. The project will also have to comply with different standards and regulations of each country involved. The project will require coordination and cooperation among multiple stakeholders such as governments, contractors, consultants and operators.

Conclusion

The railway deal between the US, India, Saudi Arabia and the UAE is a game-changer for the Middle East region and beyond. It will enhance connectivity, trade, security and geopolitics in the region. It will also create new opportunities for Indian railway companies that have the expertise and experience to execute such projects. However, the project will also face various challenges and risks that will have to be overcome with careful planning and execution. The G20 summit in New Delhi will be a crucial platform to announce and advance this mega railway deal.