Nairobi — Rites Consortium of India has finally taken over the running of the Tanzania Railways Ltd (TRL) on a 25-year lease after months of protracted talks between the group and the government.
However, the deal comes with several conditions including a moratorium on fare increases for the third class category - popular with passengers - and the investment of a $121 million in infrastructure over the next five years.
According to the agreement, a copy of which The EastAfrican has seen, $34 million will come from the sponsors while $77 million will come from the World Bank through the International Development Agency (IDA) - $33 million; and the International Finance Corporation (IFC) - $44 million.
TRL will be free to establish and revise tariffs with the exception of the third-class passenger fares.
Currently, a third class passenger ticket costs $17 from Dar es Salaam to Kigoma on the main central line from Dar es Salaam to Mwanza. On the secondary line from Dar es Salaam to Arusha, passengers pay $10 for the third-class ticket.
Minister for Infrastructure Development Andrew Chenge said that, under the deal, Rites is required to rehabilitate Tanzania Railway Corporation's rail network and introduce new locomotives for both passenger and cargo services.
The rehabilitation will be done in five stages, with the first being to restore tracks, communication equi-pment and rolling stock, for which the TRC has applied for a $44 million loan from the IFC.
Desmond Dodd, senior communications officer for IFC in sub-Saharan African, told The EastAfrican the World Bank's engagement has included support for an environmental audit of the railway's existing operations and a resettlement action plan to address right-of-way encroachments.
In June, an IFC team inspected the railway route to review the capacity of the private operator to comply with its performance standards within a reasonable timetable.
Tanzania is the third country after Mozambique and Colombia where Rites is a partner in a railway concession. The deal does not include the separate Tanzania-Zambia Railway.
Rites, a unit of state-owned Indian Railways, signed a shareholding agreement with the government in May that gave it a 51 per cent stake in the TRL, with the government retaining the rest.
Under the 25-year concession agreement, the government has formed an asset holding company, Reli Assets Holding Company (Rahco) to oversee and monitor the implementation of the contract and ensure that it is complied with as contracted.
Rahco will also guarantee compliance, monitoring of the performance of TRL and supervising of future investments in the railway infrastructure.
Mr Chenge said TRL will make a significant contribution towards the financing arrangements for the initial capital investment programme.
He said he was optimistic that within a few weeks of starting operations, TRL will be able to resume its Dar es Salaam route instead of the current situation where it operates from Dodoma to Shinyanga, Tabora, Mwanza and Kigoma.
Ally Karavina, executive chairman of Presidential Parastatal Sector Reform Commission, said that, under the agreement, TRL will be the concessionaire and operator, managing the day-to-day activities of rail transport business and development of superstructure while the Surface and Marine Transport Regulatory Agency will be the regulator.
Some 3,204 workers will be retrenched and paid Tsh31 billion ($24 million) as terminal benefits from the government, while another 3,286 workers will be absorbed by the new company.
The government decided to concession the TRC in 1998 as part of its efforts to reform different sectors of the economy.