The state rail company, Companhia de Portos e Caminhos de Ferro de Moçambique (CFM), has given notice that it will terminate its contract with an Indian firm, Ricon, which holds a long-term concession to operate the Beira-Tete rail line, if performance benchmarks are not met by March 24th. Engineering work to rehabilitate the line is reportedly over a year behind schedule. Ricon has held the concession to rehabilitate and run the 550-km Beira-Tete route-which it won by international tender-since 2004. It holds 51% of the local operating firm, the Beira Railroad Company, with CFM holding the remainder. The authorities are evidently preparing the ground to terminate the contract as soon as possible. Following an inspection of the entire length of the line, which was completed on February 8th, CFM's chairman declared that "not a single kilometre" met agreed standards.

If Ricon's contract is terminated as threatened, it will be the latest in a long line of international companies that have invested in Mozambique's port and rail infrastructure but fallen foul of CFM and other state agencies. Firms have had their contracts terminated or broken them off in frustration. The process of turning port and rail management over to international companies, on the understanding that they would invest in infrastructure on long-term contracts, was initiated in the late 1990s. The policy was viewed as preferable to the outright privatisation of CFM, at the time a large and poorly managed parastatal firm lacking capital and expertise but still regarded domestically as a national champion. The policy left CFM as more a holding company than an operational one, overseeing its concession contracts in which it is a joint-venture partner, and was deeply unpopular among the company's management and nationalists. During what has been a lengthy rearguard action, CFM's management has generally taken a combative approach to its joint-venture partners, which has undermined efficiency in joint projects. CFM has made little secret of its desire to resume control of its assets and declared that it will allow most of the remaining concessions to expire when they come to term.

Uncertainty over management of the rail line to Tete comes shortly before it is scheduled to begin providing coal export service in the third quarter of 2011, with a possible capacity of 5m tonnes per year. This is far below potential coal exports from the two largest mining companies, Brazil's Vale and Australia's Riversdale, of 35m tonnes/year (t/y) in total. Furthermore, if planned investment and expansion by all the companies involved is realised, coal exports could reach 85m t/y by the end of the decade. The exact role of the existing rail line is unclear, as Vale has stated that its preferred option is to build a short rail link to connect with the rail and port facilities at Nacala. Riversdale is examining transporting its output by barge, 500 km downstream on the Zambezi River, although the feasibility of this plan and its environmental impact have yet to be confirmed (December 2010, The political scene).