New Delhi: Railway minister Suresh Prabhu on Thursday announced measures to fund new projects through assistance from domestic and multilateral agencies, joint ventures with states, a new public-private partnership strategy and selling rupee bonds.
In his second railway budget, Prabhu said he will follow a three-pronged strategy of new sources of revenue, new norms for optimal productivity and new structure for unconventional solutions.
Prabhu said Life Insurance Corp. of India has agreed to provide Rs.1.5 trillion in financing on “extremely favourable terms”. For innovative financing, the railway ministry will also tie up with NTPC Ltd, Steel Authority of India Ltd (SAIL) and ministry of coal.
To decongest Delhi and reduce the pollution level, railways will partner with the state government to revive the almost defunct ring-railway system with 21 stations.
In the run-up to the rail budget, the National Democratic Alliance (NDA) government has already put in place several measures and the new announcements will be a step forward in improving the fiscal health of Indian Railways.
The rail ministry plans to form joint ventures (JVs) with states to undertake railway projects. While 17 states have already expressed willingness for such partnerships, six of them have signed memorandums of understanding or MOUs with the railway ministry. These states are Odisha, Maharashtra, Telangana, Andhra Pradesh, Kerala and Chhattisgarh.
In the JVs, states will hold 51% stake and Indian Railways 49%, giving ownership to states to decide on relevant rail projects and shoulder a sizable financial burden as well.
General Electric Co. (GE) and Alstom have agreed to set up two locomotive manufacturing units in Bihar. While the GE unit will focus on manufacturing diesel locomotives, the Alstom one will focus on making electric locomotives. The companies will hold 74% equity in the units.
Japan has also joined Indian Railways to build the Mumbai-Ahmedabad bullet train project at a cost of Rs.98,000 crore. Of the total cost, 80% will be Japanese funding through a Japan International Cooperation Agency (JICA) loan.
In December, Prabhu had said in an interview that anywhere in the world, railway operations are profitable largely because 30-40% of total revenue of railways comes from non-railway operations. In India, it is not even 1-2%.
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