IRFC does U-turn, plans comeback with rly electrification

Written by Rajat Arora | New Delhi | Updated: Jan 9 2013, 06:46am hrs
The Indian Railway Finance Corporation (IRFC), which has stayed away from financing core railway infrastructure projects due to cost and time overruns, might back electrification projects in the next fiscal.

IRFC could be asked to finance electrification projects of railways. Such projects have good traction and returns on investments are faster, railway board chairman Vinay Mittal told FE.

The announcement is likely to come up in the next rail Budget.

In the last Budget, the national transporter had set aside around R1,000 crore for the electrification of 1,100 kilometers of its tracks. In the upcoming fiscal, around 2,000-2,500 kilometers of track is expected to be electrified.

Financing other projects is not viable for IRFC as it can affect the market sentiments, Mittal added.

Earlier, the IRFC, whose principal function is to raise money from the market to part-finance the Plan outlay of the Indian Railways, tried its hand at project financing but had to pull back as it feared a fall in its AAA rating due to the railways' dubious distinction of having the largest number of delayed projects.

When asked about its intention to finance railway projects, IRFC managing director Rajiv Dutt said, We haven't been told anything about it. At present, we are comfortable financing the rolling stock, he said.

In the current fiscal, IRFC is to raise R15,000 crore, out of which R14,896 crore will go for investment in rolling stock and another R104 crore for RVNL.

To raise the money, IRFC is coming up with a tax-free bond issue of R8,900 crore on January 21, which would close on January 29.

We are confident of an overwhelming response to our bond issue. The AAA-rated bond issue includes a 10-year paper with a coupon of 7.18% and a 15-year paper with a coupon of 7.34%, Dutt said.