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Rs 79,398-crore loan: Railways wanted it as grant, gets partial relief

Ministry of Finance gives Railways a 2-year moratorium on repayment

Covid-related disruptions, Ministry of Railways, Ministry of Finance, special loan, Indian express news, current affairs

The Railways has instead been given a two-year moratorium just ahead of the loan redemption deadline in the coming financial year 2025-26. (Representational Photo)

To ensure its fiscal math doesn’t go awry, the Ministry of Finance has turned down a request by the Ministry of Railways to convert a Rs 79,398 crore ‘special loan’ taken four years ago into a grant. The loan was taken during 2020-21 to manage Covid-related disruptions, and partly to fund the pension liabilities.

The Railways has instead been given a two-year moratorium just ahead of the loan redemption deadline in the coming financial year 2025-26.

The Central government extended a special loan to Railways to cover the revenue loss due to the halting of train operations during March-May 2020 after the onset of the pandemic and to shore up its pension fund.

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In its pre-budget consultations with the Finance Ministry, the Railways proposed that the loan be turned into a grant, but eventually, both agreed on a two-year moratorium.

Responding to queries by The Indian Express, the Ministry of Railways said it has been “granted a moratorium of another two years for financial loan components” and will pay interest of Rs 1,358 crore for 2024-26.

Budget 2021-22 documents show that a “special loan” of Rs 79,398 crore was extended to the Railways for the “COVID-related resource gap” in 2020-21 to meet the pension expenses of 2019-20. The opening balance of Railways’ pension fund for 2020-21 showed a deficit of Rs 28,398.46 crore.

In a statement, the Ministry of Railways said, “Indian Railways is performing well. Considering IR (Indian Railways) in the transformation phase of heavy infrastructural development, IR has been granted a moratorium of another two years for financial loan components. However, during the financial years, 2024-26 will pay the interest components of Rs 1,358 crore”.

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A response from the Ministry of Finance on queries is awaited.

Even as the redemption deadline for Covid-related loans was approaching, the Centre anticipated its finances to be stretched and hence undertook a series of buybacks and switches of dated securities totalling Rs 2.15 lakh crore in 2024-25.

The special loan was provided by the Centre to the Railways contingent to certain repayment conditions linked to its performance metrics. However, it is learnt that the Railways found it difficult to meet the terms and conditions related to certain performance metrics. Following this, the Railways sought a conversion of the loan to a grant in its pre-budget consultations.

While the Ministry of Railways refused in January to share details of the loan following an RTI query citing these as confidential, the Ministry of Finance in its response said the issue of repayment of the loan by the Ministry of Railways is in “the advance stage of deliberation and is part of the Pre-Budget discussion for the ensuing Budget 2025-26”, and hence “cannot be shared”.

Aanchal Magazine

Aanchal Magazine is a Senior Assistant Editor with The Indian Express, serving as a leading voice on the macroeconomy and fiscal policy. With over 13 years of newsroom experience, she is recognized for her ability to decode complex economic data and government policy for a wider audience. Expertise & Focus Areas: Magazine’s reporting is rooted in "fiscal arithmetic" and economic science. Her work provides critical insights into the financial health of the nation, focusing on: Macroeconomic Policy: Detailed tracking of GDP growth, inflation trends, and central bank policy actions. Fiscal Metrics: Analysis of taxation, revenue collection, and government spending. Labour & Society: Reporting on labour trends and the intersection of economic policy with employment. Her expertise lies in interpreting high-frequency economic indicators to explain the broader trajectory of the Indian economy. Personal Interests: Beyond the world of finance and statistics, Aanchal maintains a deep personal interest in the history of her homeland, Kashmir. In her spare time, she reads extensively about the region's culture and traditions and works to map the complex journeys of displacement associated with it. Find all stories by Aanchal Magazine here ... Read More

Dheeraj Mishra

Dheeraj Mishra is a Principal Correspondent with the Business Bureau of The Indian Express. He plays a critical role in covering India's massive infrastructure sectors, providing in-depth reporting on the connectivity lifelines of the nation. Expertise & Focus Areas: Mishra’s journalism is focused on two of the country's most capital-intensive and public-facing ministries: Ministry of Railways: Tracking the operations, safety, and development of India's vast railway network. Ministry of Road Transport & Highways: Covering policy decisions, infrastructure projects, and highway development. What sets Mishra apart is his rigorous use of the Right to Information (RTI) Actas a primary tool for news gathering. By relying on official data and government records, he ensures a high degree of accuracy and trustworthiness in his reporting. This data-driven approach has resulted in numerous impactful reports that hold public institutions accountable and bring transparency to government operations. Find all stories by Dheeraj Mishra here ... Read More