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

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.

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”.

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”.