The government is working on a proposal to create a $ 5-billion fund to finance various infrastructure projects of Railways. Railway minister Suresh Prabhu on Saturday said the proposed Railways of India Development Fund (RIDF) will be placed before the Cabinet for its nod after sorting out some hurdles.
“There were certain hurdles that were to be cleared for the proposed $5-billion Railways of India Development Fund before we seek Cabinet approval. We are almost done the structuring of the fund and hope we will be able to take it to the Cabinet soon,” Prabhu said at a seminar organised by Indian Merchants’ Chamber.
“Nearly 20 per cent of the fund will come from the finance ministry and we expect the balance from pension funds and sovereign funds,” Namita Mehrotra, Executive Director, (Resource Mobilisation), Railway Board, said. The proposed fund, which will be anchored by the World Bank, will be of seven years.
Mehrotra said the finance ministry’s share will come in the form of equity. “It is being planned that the World Bank will route the funds through the finance ministry, which will be invested in RIDF as equity. We are hopeful of receiving a good response from pension funds and sovereign wealth funds.” The proposed fund will mainly invest in major infrastructure projects of the transport behemoth.
Pension funds are keen to put money in the Railways as it is a long-term investment destination for them with assured long term returns and capital safety assurance. “Due to insufficient capital, expansion of infrastructure and capacity augmentation did not happen for a long time. But now we are working out on various initiatives whereby we will be able to raise funds not only through our core revenue streams — with two-thirds coming in from freight and the fares chipping in with just one-third — but also through non-fare income,” Prabhu said.
LIC had agreed to invest Rs 150,000 crore in various commercially viable railway projects last year. It has already invested Rs 10,000 crore so far.
HDFC Chairman Deepak Parekh said the time has come for a careful evaluation of the railway’s assets. If resources are scarce, there needs to be greater focus on creating core assets while hiving off other assets. “The railways need to evaluate whether it should continue to have 125 hospitals, 600 polyclinics and 100 schools directly under its wing. Secondly, the railways should monetise some of its land holdings. This land may well be used for affordable housing and in turn it could bring in large resources for the railways,” Parekh said.
While the refurbishment of 400 stations looks ambitious, once there are a few successful pilots, it will set a precedent for others, he said. This is an excellent idea and needs swift implementation. “It is estimated that the average cost of redevelopment of a station will range between Rs 100 to Rs 400 crore. This money can be raised privately. If properly designed, these 400 stations alone could generate sizable resources … More importantly, the multiplier effect of redeveloping stations across the country could unleash thousands of business opportunities for small and medium enterprises and jobs for our youth,” Parekh said. WITH PTI