UPA plans last gasp push to investments in railways before Lok Sabha elections

NEW DELHI: The government plans to give a boost to investments in railways before the model code of conduct for election kicks in by allowing public sector undertakings like Coal India and NTPC to build railway lines in mining areas and providing viability gap funding to Indian Railways. These proposals, if implemented, will pave the way forRs 3,24,800-crore investments in the cash-starved Indian Railways in the 12th Five year Plan period of 2012-17, a senior government official told ET.

The Prime Minister's Office had in November last year set up a committee under Planning Commission member BK Chaturvedi to suggest ways of innovative financing in railways, after Indian Railways cut down on its expenditure in a big way, impacting modernisation of tracks and railway stations, and safetyrelated work.

According to the official, who did not wish to be identified, the committee has proposed to allow players like NTPC and Coal India to build and use railway lines in areas of mining for their own commercial use. “Indian Railways can give them a rebate for their investment for a certain period of time while simultaneously using these lines,” the person said.

The committee has also suggested that government should provide financial support in the form of viability gap funding — or, a one-time grant for major infrastructure projects falling short of financial viability — to the Indian Railway Finance Corporation ( IRFC) to help it raise money for projects from states and private investors.

“There are many lines which are important for the state exchequer and where doubling (of railway track) can be done. By providing VGF we can leverage the small investments by states and private players in case of heavy-route lines and ports,” the official said, adding that the commercial agreements will have to be worked out between railways and the parties involved.

The committee, which submitted its report to the PMO and the railway ministry last month, has also proposed allowing states to run heavy route lines. A decision on the recommendations is expected soon.

Experts have welcomed the proposals, saying they would boost infrastructure development in railways. “These innovative ways of financing will help in debottling the constraints that the economy is facing because of lack of infrastructure development in railways,” DK Joshi, chief economist at Crisil Ratings, said. However, there are apprehensions over implementation of these proposals as railway authorities have always been reluctant to experiment with new ways of financing.