Montek wants non-recourse funding for railways

Monday, 24 January 2005, 08:00 Hrs
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NEW DELHI: Most railway development projects should be funded through non-recourse funding, deputy chairperson of the Planning Commission Montek Singh Ahluwalia said here Monday.

Under a non-recourse finance arrangement, the lender does not seek repayment from the borrower personally but agrees to take income from the asset being created using the funds.

"It should be our objective to transform Indian Railways in the 11th Five Year Plan (2007-12) to benchmark its
all-round improvement in terms of expansion, modernisation and efficiency," Ahluwalia said at the inauguration of a daylong seminar organised by Rail Vikas Nigam Ltd. (RVNL).

A subsidiary of Indian Railways, RVNL marked its second foundation day Monday with the seminar to explore private-public partnership to fund development projects like better port connectivity.

Ahluwalia emphasised the need to set up a Rail Tariff Regularity Authority to regulate the business segment of the railways.

"While some of the projects need to be funded out of general revenues, the rest of the railway projects should be financed through non-recourse funding," he said.

On public-private partnership in the development of infrastructure in general and that of the railways in particular, Ahluwalia said it was "more than getting revenues from the existing system".

He said public-private partnership also involved joint activity wherein suppliers of services brought in some finances from private sources.

At present, legal framework prevented Indian Railways from borrowing directly from the market.

Ahluwalia urged RVNL to function as an instrument for getting finances from the private sector.

"Besides, it should collateralise to raise revenues of Indian Railways. For this, it needed non-recourse finances," Ahluwalia said.

In line with the Common Minimum Programme of the government, Ahluwalia said a committee had been set up to promote development and strengthen infrastructure through public-private partnership.

"Indian Railways formed an important component of this committee," he disclosed.

Minister of State for Railways Naranbhai Rathwa said so far 56 bankable projects, estimated to cost 120 billion, had been entrusted to RVNL for completion under a time bound programme.

In this connection, Rathwa called for changing the present rate-of-return proposition to develop backward areas. If not, the balanced development of infrastructure in the country would be retarded.

Railway Board and RVNL Chairperson R.K. Singh said Indian Railways had taken a big stride in mobilisation of resources from other than the usual sources.

"In this connection, the challenge before RVNL is to mobilise 80 billion and structure its projects to become self-sustaining," he said.

Source: IANS
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