Railways unveil $5-bn development fund

In its bid to ensure sufficient flow of funds to build big ticket projects such as freight corridors, warehouses, last mile connectivity for ports and electrification, the Indian Railways has decided to set up a dedicated $5 billion as Railways of India Development Fund (RIDF), said sources, elaborating that the fund will support commercially viable investment in rail sector in India over the period of next seven years. The fund will be anchored by the World Bank to serve as an institutional mechanism for the national transporter to arrange fund from the market for its investments and it will be managed independently by a non-government entity.

According to sources, several rounds of consultations have already been held with various international pension funds including some big Canadian names to gauge market response and it has reportedly received positive response from both domestic and international investors. As per the details of the proposal, the railways would raise 20% of $5 billion on its own and will work on the commercial principles of project-based funding rather than sovereign-based borrowing being undertaken for Indian Railways. Projects which command potential to give early returns such as freight lines and electrification projects would be funded by the RIDF. Currently, because of the burden of high wages and pension bills, cost overruns of incomplete projects and increasing operational cost due to losses in passenger segment, there are hardly any funds left to undertake new projects which are profitable on standalone basis, they added.