Global praise for railways will boost funding
Global financial services firm Morgan Stanley has rightly noted that Railways Minister Suresh Prabhu has been taking an “innovative approach” to funding Indian Railways, and that if his plans work out, it could be a game-changer not just for the national transport giant but the Indian economy as a whole. For long, Indian Railways has suffered from acute financial mismanagement among many other problems, as a result of which it has consistently performed below potential.
And so it is that, despite being the backbone of a two trillion dollar economy, Indian Railways is effectively bankrupt. Thankfully, in the year and a half that Mr Prabhu has been in charge, he has sought to infuse fresh thinking into the system. Unlike his predecessors who mostly used the railways as Central largesse to appease domestic constituents, Mr Prabhu hasn't made the addition of new trains his priority — instead, as the Morgan Stanley report notes, he is focussing on the tougher but far more important task of upgrading Indian Railways so that it can be the economic mega-force that it should have been. His most important efforts in his regard have been focused on bringing in new investments. The ultimate goal is to raise $140 billion for the next five years, most of which will go into developing rail infrastructure.
Towards this end, Mr Prabhu has launched several out-of-the-box measures. For example, under his watch, Indian Railways will be issuing green bonds for the first time ever. Green bonds are just like any other bond or debt instrument, except that they are used to finance eco-friendly projects only. Such bonds are currently very popular given the worldwide focus on promoting clean and sustainable projects in order to fight climate change. India too is playing an increasingly active role in this sector — and it is, therefore, only in the fitness of things that its mammoth railway unit is part of the national effort.
In fact, as part of the revamp process, Indian Railways has set a target of installing one gigawatt of solar power, apart from setting up large-scale solar power projects on its unutilised land. Viewed together, this will be a sizeable contribution to the national target of operationalising 100 GW of solar power by March 2022. Similarly, Mr Prabhu has also been working with the life Insurance Corporation to generate additional investments of Rs1.5 trillion over the next five years. This project has already had a promising start: In October, Indian Railways received a Rs2,000 crore loan from the lIC.
Additionally, foreign investors have also been roped in. Some of them are coming in through traditional FDI routes, such as the General Electric Co and Alstom, who are setting up diesel and electric locomotive factories in Bihar. Japan's pension fund, which has an overall accumulated size of 140 trillion yen, has emerged as a less-conventional partner while talks are on with the World Bank for creating a $30 billion fund for key rail infrastructure projects.