Prabhu sees big role for private investors in Railway’s Rs-1,00,000 expansion
08 Aug 2015
Railway minister Suresh Prabhu on Friday asked foreign funds and domestic investors to invest heavily in the country's transport backbone, Indian Railways, on a par with the other sectors like telecom, power and road sectors as the national transporter needs a whopping Rs1,00,000 crore this year and Rs8,50,000 crore over the next five years.
"You have successfully invested in the telecom and power and roads sector, but never in the railways. The government also didn't invest during the past two decades and so we've chalked out a five-year plan under which we are looking at an investment of Rs1,00,000 crore this financial year and Rs8,50,000 crore over the next five years," Prabhu told a meeting of overseas investment bankers and domestic funds.
Addressing a closed-door meeting with fund houses, including multinational i-bankers, FIIs, domestic insurers like LIC and other financial institutions, at the BSE Tower on Friday, Prabhu rolled out the red carpet for foreign funds and domestic investors.
The minister admitted possible delays in private investors getting to invest in a public service like the railways. That, he said, will be gradual and may take time.
"We are looking at private sector investments, too, though we know it will take time," the minister was quoted as saying by one of the participants.
He also admitted that the present railway infrastructure is inadequate to run new services as railway lines are running at 100 per cent of their capacity. Indian Railways, he said, needs to invest in new capacity and infrastructure to ease rail traffic.
It costs the railways Rs10 crore to lay a 1-km rail link and Rs6 crore for doubling / tripling of an existing railhead, he pointed out.
Meanwhile, Prabhu said, state-run insurance major Life Insurance Corporation of India (LIC) has committed to subscribe Rs1,50,000 crore worth of RFC bonds.
Prabhu said that given the state of public finances and the lack of adequate budgetary support, Railways would require large funds from the private sector.
The minister said "for improving rail infrastructure we need to invest 10 per cent of the total infrastructure GDP of $2 trillion over next five years.
"This means we need to invest $200 billion annually in the railways over the next five years, after which we need an annual investment of 1.5 times more than this (or $350 billion) for the next five years," Prabhu said.
Pointing to the need for rationalisation of the operations of the Railways through optimising passenger and freight fares, Prabhu said that while as much as 65 per cent of the rolling stock was passenger trains, they generate only 30 per cent of revenue, leaving 70 per cent of revenue to be mobilised by freight trains, which constitute only 35 per cent of the rolling stock.
On modernization of the Railways, he said plans a afoot to construct 400 model railway stations this fiscal. He also said that as many as 79 of the announcements made in the rail budget for the year have already been implemented.
On involving the states in railway development, he said, "We have already signed MoUs with Maharashtra and Odisha and are on our way to doing the same with a total of 17 states."
Maharashtra, he said, has agreed to pump in Rs10,000 crore over the next 10 years.
"On the part of the Railways, we will be investing Rs 70-80,000 crore in Maharashtra over next five years," he said.
On the progress of the dedicated freight corridor project, he said, out of the Rs82,000 crore approved by the cabinet last month, Indin Railways has already floated tenders for Rs19,000 crore.
On the two proposed locomotive units with FDI participation - one electric and the other diesel - he said tenders will be floated by the end of this month and a number of MNCs have evinced interest in the project.
