The railways plan to invest Rs 5 lakh crore in capacity addition during the 12 Five-Year Plan (2012-17), according to a senior official of the Indian Railway Finance Corp, the financing arm of the state-run enterprise. About a fifth of this corpus, which is a substantial jump from the 11th Plan’s expenditure target of 1.09 lakh crore, will be raised by IRFC through market borrowings while the rest will come through budgetary support, internal revenues and the public-private partnerships, the official said. IRFC’s market borrowing plan includes issuance of tax-free bonds worth about 10,000 crore by end of January, the official added.
“To financially boost its infrastructure development plans, the railways will have to raise money from the market, given the internal resources add a meager percent to its revenues,” the official said. Cash-strapped Indian Railways, which manages the world’s third largest rail network, is keen on attracting private investment as it does not generate enough funds to finance its development plans. Revenue shortfall has already forced it to cut plan outlay for the current fiscal to Rs 55,881 crore from the Rs 60,100 crore targeted earlier. “For capacity addition, railways can’t depend solely on internal resources or market borrowings, it’ll have to invite private partners,” a railway official said.
To facilitate this, the Cabinet Committee on Infrastructure recently approved a policy on participative models for rail connectivity and capacity augmentation, in line with the railways’ internal policy document. “The ministry of railways wishes to attract private capital for accelerated construction of fixed rail infrastructure. For this, it has formulated participative investment models for its existing shelf of projects and also for new ones,” the policy document said. The modes suggested to route private investment in fixed rail infrastructure are non-government railway model, joint ventures, execution of projects through the build, operate, transfer mode, capacity augmentation, and state government projects.
“This kind of policy is welcome but a confidence building measure is required. Given the unsuccessful past experience with private partners, the private confidence in railways is not high,” said Vinayak Chatterjee, chairman of Feedback Infra. Indian Railways transports 2.65 million tonne of freight and 23 million passengers every day.