Indian Railways issued a draft cabinet note for setting up a USD 5 billion Railways of India Development Fund (RIDF).
Within the fund, the World Bank will be involved and it will serve as an institutional mechanism for the national rail company’s investments.
Several rounds of consultations have already been held with various international pension funds including some big Canadian names to gauge market response.
“Market sounding exercise has been carried out and has received positive response from both domestic and international investors. As per the details of the draft note, the railways would raise 20% of $5 billion on its own. It will work on the commercial principles of project-based funding rather than sovereign based borrowing being undertaken for Indian Railways,” an official said, quoted by The Economic Times.
“Projects which can 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,” the official said.
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