World Bank partners with Indian Railways to set up Railways Development Fund
World Bank to be anchor investor in Rail Development Fund; says Suresh Prabhu, Union Minister for Railways. Indian Railways is likely to have more Foreign Direct Investment (FDI) from the United States for proper transportation sector which is key to India’s growth; adds Suresh Prabhu
Washington: Union Railway Minister Suresh Prabhu on Saturday said that the World Bank will work with the Indian Railways to set up a railways development fund that would finance a part of $142 billion project to modernise the railways.
The railway minister did not divulge details on the size and nature of the fund, adding that it was “still under discussion,”.
Against the backdrop of key reforms undertaken by Indian Railways over the past year, the World Bank has agreed to be the ‘anchor investor’ in the country’s ambitious Railway Development Fund (RDF) to expand and modernize the railway infrastructure. Disclosing this after meeting with the top leadership of the World Bank Group here over the past couple of days, Railway Minister Suresh Prabhu expressed optimism that the fund would kick in soon, given the unanimity that the railway reforms are in the right direction.
Speaking to Indian journalists based in Washington, the Minister declined to quantify the scale of World Bank’s commitment, but indicated that it could well be the largest-ever assistance provided by the Bank to Indian Railways. Separately, Prabhu also took up with US EXIM Bank chairman Fred P. Hochberg the possibility of structuring an India-specific financing model to take advantage of upcoming investment and business opportunities in the rail sector.
Prabhu, who also held meetings with US Secretary of Transportation Anthony Foxx and American business leaders, outlined the Railways’ plan to invest $142 billion in the coming five years and double it over the next five-year cycle. On the reforms front, he said 110 measures have been implemented, fulfilling all the announcements made in the Railway Budget of 2015, highlighting the fact that Indian Railways now allows 100 per cent private sector investment in most segments of the railway infrastructure such as suburban rail, metro rail, locomotives and rolling stock, manufacturing and maintenance, signaling and electric works and dedicated freight lines.
At his meetings with officials of the World Bank and its affiliate, International Finance Corporation, the Minister discussed the Railways’ efforts to expand, modernize, decentralize decision-making, improve efficiency and meet customer expectations.
He also outlined the push for greater transparency through e-tendering and change attitudes and mindsets. Prabhu discussed with US Transportation Secretary Foxx the possibility of expanding the bilateral engagement in transportation sector following the Memorandum of Cooperation that was signed during his India visit last April.
“Both sides agreed to promote cooperation in a number of areas including railway safety and capacity building, through joint workshops and exchange of visits,” an Indian Embassy release aid. During his interaction at the US India Business Council, Prabhu invited American businesses to invest in the expanding railway infrastructure.
He informed that a draft regulatory framework for transparency in fare and freight pricing, supporting public private partnerships and ensuring efficiency parameters in the rail sector. A wide range of railway projects currently being implemented include a dedicated freight corridor, a high speed train project and doubling/tripling of train tracks in heavy traffic zones, the Minister said. He also touched on the modernization of 400 railway stations, technological up-gradation of signal system, instrumentation and other safety measures.
He stressed that Indian Railways has followed a completely transparent process in awarding the $7 billion contracts to GE and Alstom. He also spoke about the huge investments coming from Japan, which is helping India build its first bullet train with a highly concessional loan.
“Our idea is to get part of this plan funded by multicultural bodies and the World Bank that have global experience and access to technology. This fund would be kickstarted soon as there is unanimity in the World Bank leadership,” Prabhu said after a meeting with senior World Bank officials.
“The recently concluded visit of Railway Minister Suresh Prabhu has been very successful and we can hope more FDI from the US and an increased financial assistance from the World Bank,” said a senior official. The official cited Prabhu’s meeting with the World Bank officials at Washington last week and said that the Bank has agreed to invest in the proposed Railway Development Fund. The fund is being created to modernise Indian railways.
The railway minister had meetings with the government officials, policy makers and business community to woo FDI in railways.
He highlighted that the ministry has permitted 100 percent private sector investment in most segments of the railway infrastructure such as suburban rail, metro rail, locomotives and rolling stock, manufacturing and maintenance, signalling and electric works and dedicated freight lines.
The railway minister was in Washington on a two-day visit and had met officials of the IFC (International Finance Cooperation) , US transport officials and also attended a World Bank meeting on transportation.
The IFC is keen to monetise the assets of the Indian Railways, the report stated.
“Globally, railways get 30-40% of their income from non-railway operations. In India it is not even 2%. So this is going to be challenging time particularly when Indian railways would have to bear the additional burden of the pay commission,” he said.
Prabhu is also believed to have interacted with many infrastructure companies and investors, asking them to invest in Indian Railway, Business Today said.
“The Ministry of Railways has introduced a slew of initiatives, opportunities and reform measures that will allow investors to strive and grow. Since the last rail budget in 2015, the ministry has implemented 110 reform measures, fulfilling all the announcements made in the budget. We encourage American enterprises to take advantage of the transformation that the entire ecosystem is undergoing,” Prabhu added.