The Manila-based international lending agency has been suggesting that the Railways move out of non-core activities by privatising its production units and concentrating only on freight and passenger traffic. Though, the Railways have accepted privatisation through SPVs, they are questioning the need to hive off the profit-making production units.

Earlier speaking to The Financial Express, Railway Board chairman VK Agarwal had ruled out any comprises on the issue.

"We are going according to our own requirements. But the fact is that we need money and ADB is looking for a place to invest money. Indian economy is stable and safe for investment and we have an extensive rail network," he said.

According to an official press release, the railways have made it clear tothe bank that they would not accept any precondition especially in view of the "general consensus regarding accelerated growth rate and priority investment by the Indian Railways".

According to sources, the Railways have given an assurance that they would study the issues of privatisation and corporatisation.

The ADB team held discussions with senior officials of the ministries of railway and finance, and Planning Commission. It also held meetings with industry representatives and rail users.

The loan is proposed to be provided in US dollars with re-payment in 25 years including a grace period of five years.

"The discussions between the mission and the Indian Railway officials have reflected understanding regarding the scope and cost of the sector projects and arrangements for its financing and its implementation," the release claimed.

The loan was being negotiated for 18 schemes. According to the Railways, most of these schemes have already been approved for execution by the Indian government. Thetotal cost of these schemes is estimated to be $1800 million.It comprises $860 million in foreign exchange and $940 million equivalent in local costs. Out of the foreign exchange component, $300 million is slated to be offered by ADB to the government of India as loan.

The recent ADB team was a follow-up of the fact-finding mission, which visited India in March 1998. It originated as a result of the recommendation made by Mckinsey and Swede Rail in their technical assessment report on the Indian Railways in May 1997.