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  1. Bullet train project: Another hurdle? Finance Ministry asks Indian Railways to borrow funds from market

Bullet train project: Another hurdle? Finance Ministry asks Indian Railways to borrow funds from market

Indian Railways has been asked by the Finance Ministry to borrow funds from the market. Additionally, the Finance Ministry has also asked the national transporter not to expect the requisite funds as additional Gross Budgetary Support from the Budget.

By: | Published: July 23, 2018 9:43 AM
railways An amount of around Rs 1,800 crore has been earmarked for the Mumbai-Ahmedabad bullet train project in the current fiscal’s budget.

Bullet train project hurdles continue? For PM Narendra Modi’s ambitious Mumbai-Ahmedabad bullet train project, Indian Railways has been asked by the Finance Ministry to borrow funds from the market. Additionally, the Finance Ministry has also asked the national transporter not to expect the requisite funds as additional Gross Budgetary Support from the Budget, according to an IE report. This year, around Rs 10,000 crore are required by the National High-Speed Rail Corporation (NHSRCL) for land acquisition, part of Indian government’s commitment towards the Rs 1.08 lakh crore mega project. Also, for the Dedicated Freight Corridor project, there is a commitment of around Rs 5,000 crore.

In total, the national transporter sought nearly Rs 18,000 crore from the Finance Ministry, the report stated. However, after several meetings between the two ministries, Indian Railways has been asked to look for ways to raise the amount from the market, which is to be repaid by the Finance Ministry later. While the Finance Ministry has said that the principal amount will be paid by them, the national transporter has said that it will not be able to bear the yearly interest as well as associated charges. Also, borrowing the amount could mean that the cost of funding by the Indian government will escalate for the bullet train project which is billed to be “as good as free” owing to the inexpensive Japanese loan, the report stated.

As per the pattern of shareholding, Rs 10,000 crore is to be paid to the NHSRCL by the Indian government, while Gujarat and Maharashtra, are to pay Rs 5,000 crore each. The rest of the amount is to be paid through a loan at 0.1 per cent interest by Japan.

According to Finance Ministry officials, there is no problem in the funding. The officials also said that in an attempt to keep the fiscal deficit under check, raising money from the market is part of the government’s ways of funding projects through various methods.

For railways, one of the ways for borrowing money is through its financing arm, the Indian Railway Finance Corporation (IRFC). For the implementation of various projects, it has tapped into loan from the LIC. But, borrowing money from the LIC for the bullet train project will be a problem because as per rules set by the Indian Railways, the money from LIC can only be tapped into for remunerative projects which have a healthy financial rate of return, the report stated. Meanwhile, an amount of around Rs 1,800 crore has been earmarked for the Mumbai-Ahmedabad bullet train project in the current fiscal’s budget.

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