Railway has secured a good amount of investment from LIC which is the state-owned insurance giant to ensure infrastructure development for next five years. The deal was sealed by signing an agreement between LIC and Indian Railways. The agreementis achieved with a low-interest rate to help railways achieve the required developmental targets. LIC will be providing at least $24 billion in the next five years for the Indian railways.
Railway has planned investments in high-speed rail and elevated corridor, station development, wagon production and logistic parks for five years that is ending at the end of 2019. Railway Minister Prabhu proposed the investment of Rs 8.5 trillion in the last railway budget for expansion and modernization of the railways.
In an email, LIC has indicated that it is planning to invest Rs. 3 trillion, which will be divided into 50% Government bond. LIC has focused on real estate sector as its primary investment area. LIC is India’s largest money manager with a total asset of minimum Rs. 20 trillion.
Railway is tapping sources of funding for its critical developments of infrastructure for its low efficiency and resistance to raising the fares causing financial stress in the past. Indian railways are collecting a surplus of Rs. 7278.46 crore before 31 March and about double the amount of Rs. 14,264.71 crores in the coming year. The white papers released by the railways suggest about Rs. 2 trillion is required to complete the pending projects.
Railway Minister told the press that the railways float bonds of 30-year tenure of interest rates linked to government security rates for the insurer to make the investment. Such initiatives would help railways to attract resources for faster execution of projects.
Prabhu spoke at an event organized by industry lobby Assocham about the plans to improve the ability of attracting investments for the development of the railways from various sources such as the world bankandthe Asian development bank.He also suggested that railways are currently holding talks with other sources that he could not reveal now.
Capacity of the railways has to keep up with the pace of the industrial growth in the country in order to support the growth rate of the country. The high-density networks and routes are already saturated due to the high rate of growth in the industrial sector. Hence, railway is highly focused on improving the condition with the help of investment to develop the areas of industrial growth. LIC would help railways with a long-term investment eliminating any foreign exchange risks s the need of hour for the benefit of the railways to focus on the development.
The NDA government has already provided Rs. 7,000 crore in addition to the infrastructure sector in the union budget of 2015-16. The railway has also doubled the plan size by earmarking Rs 1 trillion for the year 2015-16. The government will provide Rs. 40,000 crore as a budgetary support about Rs. 10,050 crores higher than last year.
(Source: This article has been adapted from the article "LIC signs agreement to commit Rs1.5 trillion for Indian Railways" that appeared on MAR 12 2015 in livemint.com)