Multilateral funding agency Asian Development Bank (ADB) Wednesday said it has signed an agreement to provide $750 million equivalent in Indian rupee long-term financing to electrify railway tracks in India.
It is the largest single non-sovereign loan ever committed by ADB to Indian Railway Finance Corporation (IRFC) to fund the railways track electrification project, ADB said in a release.
As part of a broad modernisation programme that will help India's railway sector transition to electric power and away from dependence on fossil fuels, it said.
Concurrently, with the loan agreement signing, risk participation agreements were signed with private risk participants for the project.
IRFC will use the proceeds from the loan to install electric traction equipment along about 3,378 kilometres of existing railway lines to enable migration of passenger and freight traffic from diesel to electric traction.
The electrification assets will be leased to Indian Railways, the country's national railway system, under a long-term lease agreement, ADB said.
"This is a flagship project demonstrating ADB's strategy of supporting key state-owned enterprises in strategic sectors," said ADB Vice-President for Private Sector Operations and Public–Private Partnerships Diwakar Gupta.
It also reflects a major push by the private sector operations of ADB into transport infrastructure, and particularly railways, a sub-sector in which traditionally such operations have not contributed a great deal, Gupta said.
"ADB is adding value in this transaction by providing and mobilising long-term, non-recourse project financing for critical infrastructure development," said the Director General of ADB's Private Sector Operations Department Michael Barrow.
Barrow said as the aggregate funding requirement of Indian Railways is quite substantial, ADB is partnering with it to help tap into a diverse set of funding sources.
The Indian government has developed a five-year capital expenditure programme of USD 132 billion for modernisation of Indian Railways.
This comprises network expansion and decongestion, enhancement of safety and passenger amenities, development of dedicated freight corridors, station redevelopment, and procurement of rolling stock and other related assets.
The electrification of railway tracks is part of this master plan, which is critical for the movement of goods and people within the country, ADB said.