Railway ministry plans $5 billion fund to finance projects
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Mumbai: The railway ministry is in advanced stages of finalising a proposal to create a $5 billion fund to finance its various infrastructure projects. Once the proposal for floating Railways of India Development Fund (RIDF) is finalised, it will be placed before the Cabinet for its nod, railway minister Suresh Prabhu on Saturday said.
“There were certain hurdles that were to be cleared for the proposed $5 billion Railways of India Development Fund before we seek Cabinet approval. We are almost done the structuring of the fund and hope we will be able to take it to the Cabinet soon,” Prabhu told a seminar organised by the Indian Merchants’ Chamber.
The proposed fund, which will be anchored by the World Bank, will be of seven years. “Nearly 20 per cent of the fund will come from the Finance Ministry and we expect the balance from pension funds and sovereign funds,” Namita Mehrotra, executive director, (resource mobilisation), Railway Board, said. She said the finance ministry’s share will come in the form of equity.
“It is being planned that the World Bank will route the funds through the Finance Ministry, which will be invested in RIDF as equity. We are hopeful of receiving a good response from pension funds and sovereign wealth funds.” Mehrotra said the proposed fund will mainly invest in major infrastructure projects of the transport behemoth.
Prabhu said pension funds are keen to put money in the railways as it is a long-term investment destination for them with assured long term returns and capital safety assurance. The government has also embarked on a mid-term plan for creating infrastructure and expects to spend nearly Rs.8.56 trillion through various funding sources.
“Due to insufficient capital, expansion of infrastructure and capacity augmentation did not happen for a long time. But now we are working out on various initiatives whereby we will be able to raise funds not only through our core revenue streams—with two-thirds coming in from freight and the fares chipping in with just one-third—but also through non-fare income,” Prabhu said.
Life Insurance Corporation had agreed to invest Rs.1.5 trillion in various commercially viable railway projects last year and has already invested Rs.10,000 crore so far. He said railways will continue to explore the public private partnership (PPP) model for various plans, especially for those projects which are capable of repaying debt.
It can also be noted that, the Japan International Cooperation Agency has also agreed to provide loan of around Rs.1 trillion at 0.1% interest for a 50-year tenure with a 15-year moratorium for the Mumbai-Ahmedabad bullet train project.
The bullet train project implementation period is slated to be six years—between 2017 and 2023—for the 508km long route. The operating speed will be 320 kmph while the maximum speed will be 350 kmph. Prabhu informed the government has also proposed an integrated development model for the PSU.
“The redevelopment of railway stations will be carried out in an integrated manner to house trains, buses, auto-rickshaws and taxis.
“We signed an agreement with Gujarat government and Surat Municipal Corporation two weeks ago for the redevelopment of Surat station. Work on two more stations will start soon in and around Delhi,” Prabhu added.