New Delhi: Months before the United Progressive Alliance (UPA) government is to table a vote-on-account for interim funding of railway expenses, a high-powered panel formed under the directions of the prime minister’s office (PMO) has suggested borrowing from the market for projects in electrical, signalling and railway construction.
According to officials, the report of the panel chaired by Member/Planning Commission Mr.B.K. Chaturvedi suggests “innovative methods of financing” be explored.
The panel is expected to give its report to the PMO by year-end. “There is a limit to which the railway can rely on increasing freight and fares to meet financing needs,” an official said.
Traditionally, the Railways does market borrowings only for its rolling stock through its financing arm the Indian Railway Finance Corporation (IRFC). Recently, IRFC expressed its intention to raise Rs 10,000 crore through tax-free bonds in the current financial year (2013-14). The bonds would be issued in one or more tranches subject to the shelf limit for FY14,” IRFC said in its draft shelf prospectus.
Earlier, the government had floated the idea of IRFC getting into project financing, but the latter was not very comfortable with the idea owing to construction risks, and time and cost overruns.
“Apart from market borrowings for projects, the committee has also suggested that Railways should increasingly look at projects under the public-private partnership (PPP) mode to fund its financing requirements,” said the official.
The Planning Commission has estimated that Railways could raise around Rs 100,000 crore through the PPP mode in the 12th five-year Plan (2012-13 to 2016-17), but according to 2013-14 Budget, it had targeted to raise just Rs 6,000 crore.
Apart from the Planning Commission member, the high-powered committee includes chairman of the Railway Board, secretary in the department of expenditure, executive chairman of IDFC, among others.
The Railways’ Plan expenditure is financed through gross budgetary support (GBS), internal accruals (Freight and Fares) and market borrowings.
In 2013-14, the Railways had pegged a Plan investment of Rs 63,363 crore of which GBS and road safety fund will contribute Rs 28,000 crore, internal resources Rs 14,260 crore, market borrowing Rs 15,103 crore and mobilisation through PPP Rs 6,000 crore.
Overall, in the 12th Plan period, the Indian Railways’ Plan expenditure has been estimated at Rs 5.19 lakh crore, of which GBS is expected to contribute Rs 1.94 lakh crore, internal resources Rs 1.05 lakh crore, market borrowings Rs 1.20 lakh crore and another Rs 1 lakh crore is expected to be raised through the PPP mode.