Hobbled by time & cost overruns, IRFC stops funding railway projects
“IRFC won’t be getting into project funding any time in the near future until there’s a clear direction from the railway ministry. Rail projects have very low internal rate of return (IRR) as there are time overruns in implementation of projects leading to cost escalations. All this can affect the credit rating of IRFC, which is AAA at present,” said a senior railway officer, requesting anonymity.
Only last year IRFC ventured into project financing by providing funds for a signalling project. As per the 2011 budget, it was to raise R8,654.38 crore for infra projects but could raise only Rs 2,000 crore.
Railways has the dubious distinction of having the largest number of delayed central sector projects, with cost overruns of over R70,000 or 120% more than the costs determined at the conception stage. The projects are also delayed by up to 216 months that could upset any financial institution funding such projects. In one of the worst cases, a freight operation information system approved in March 1983 at an estimated R520 crore has been delayed by
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