|
New Delhi, 12/03/2012,
The
Railways has sharply reduced market borrowings meant for financing
infrastructure projects this fiscal.
The
Indian Railway Finance Corporation (IRFC), the market borrowing arm of the
Railways, had originally budgeted to raise Rs 8,654.38 crore for infrastructure
project financing. However, IRFC has raised only Rs 2,000 crore for the purpose
so far this financial year, said a Railway source in the know of developments.
IRFC
funds have primarily been used to fund acquisition of rolling stock, and this
was the first year when as much as 42 per cent of the borrowings were to be
used for project financing.
GOOD MOVE
This
reduction is seen as a good move for IRFC, say experts . Majority of rail
projects have low rates of return, which could in turn jeopardise the credit
rating of IRFC. Till now, it has always received investment ratings equivalent
to India's
sovereign debt.
“Due
to project and time overruns, rail projects have huge cost escalations by the
time they are implemented. So, they carry much lower levels of internal rate of
return (IRR) by the time of implementation,” explained Ms Vijayalaksmi
Viswanathan, former Financial Commissioner, Indian Railways.
The
Railways is also taking a re-look at the earlier proposal to significantly
divert IRFC borrowings to infrastructure. “IRFC funds cost the railways about
8.5-9 per cent. So, we would like to invest them only in those assets that have
assured 14 per cent returns. It is easy to convince investors when funds are
going for wagons, which are known productive assets,” explained a Railway
Ministry source. “But, with project finance in the Railways system, it is
difficult to pin-point to the investor as to which of the projects the money
will be spent on,” the source added.
Ring fencing
So,
the Railways, which was looking to “ring fence” the fund usage for productive
assets, has decided to use it in only two kinds of projects — railway
electrification and doubling — with identified high IRR. These are identified
projects, close to completion, where more freight trains are used.
In the
current fiscal, IRFC was budgeted to borrow Rs 20,454.38 crore, out of which Rs
11,800 crore was to be routed to acquire rolling stock for the Railways and
another Rs 140 crore for Rail Vikas Nigam Ltd (RVNL), which invests in various
bankable rail-link projects with private partnership.
|