Bullet train project: Finmin wants Railways to tap market for funds

Prime Minister Narendra Modi’s pet project to set up a Mumbai-Ahmedabad high-speed rail corridor with Japanese help may face another hurdle in finding the requisite finances, after the delay caused by land acquisition woes.

The finance ministry has now asked fund-starved Indian Railways to tap the market for funds for over and above the around Rs1,800 crore earmarked in the current year’s budget for the Mumbai-Ahmedabad bullet train project.
The finance ministry is also reported to have told the Railways that the requisite budgetary support for the project is unlikely in view of the government’s own financial crunch.
The National High-Speed Rail Corporation (NHSRCL) set up by the government has already invested around Rs10,000 crore for acquiring land and initiating survey and preliminary work on. The central government has committed Rs15,000 crore as its commitment towards the Rs1,08,000 crore mega project.
Reports said the Railways had sought around Rs18,000 crore from the finance ministry, for initiating work on the Japanese-backed project. However, several meetings between the two ministries have failed to arrive at a mutually-acceptable solution.
The finance ministry wants the Railways to look for ways to raise the amount from the market, which will be repaid by the finance ministry later.
However, the Railways has pointed to the interest cost and associated charges of such borrowings and that it will not be able to bear the additional yearly burden.
Market borrowings will also escalate the total cost of the Bullet train project and prove costly for the government despite the cheap Japanese loan that will meet most of expenses of the project.
As per the pattern of shareholding, Rs10,000 crore is to be paid to the NHSRCL by the Indian government, while Gujarat and Maharashtra, are to pay Rs5,000 crore each. The rest of the amount is to be paid through a loan at 0.1 per cent interest by Japan.
The finance ministry’s argument is that while funds can be raised from the market, it will affects government’s efforts to keep fiscal deficit under check.
The Railways will have to borrow money is through its financing arm, the Indian Railway Finance Corporation (IRFC) or tap sources like LIC in case government funds are not forthcoming, say reports.