File Photo: Union Railway Minister Suresh Prabhu
Railway minister Suresh Prabhu today asked foreign funds and domestic investors to replicate with the railways their success in the telecom, power and road sectors as the national transporter needs a whopping Rs 1 trillion in funds this year and Rs 8.5 trillion over the next five years.
"You have successfully invested in the telecom and power and roads sector, but never in the railways. The government also didn't invest during the past two decades and so we've chalked out a five-year plan under which we are looking at an investment of Rs 1 trillion this financial year and Rs 8.5 trillion over the next five years," Mr Prabhu told a gathering of overseas investment bankers and domestic funds led by insurers and financial institutions.
The closed-door meeting at the BSE Tower in Mumbai this evening, where Mr Prabhu rolled out the red carpet for foreign funds and domestic investors, included multinational i-bankers, FIIs, domestic insurers like LIC and other financial institutions, sources said.
However, the minister was quick to admit that private investment in a public service like the railways will take time.
"We are looking at private sector investments, too, though we know it will take time," the minister was quoted as saying by one of the participants.
Most railway lines are running at 100 per cent of their capacity, leading to heavy congestion. Hence, investments are needed to ease rail traffic, he said, adding that it will cost Rs 10 crore for laying a 1-km rail link and Rs 6 crore for doubling/ tripling of an existing railhead.
Stating that most of the funds for railways come either from public institutions like LIC, which has committed to subscribe Rs 1.5-trillion worth of RFC bonds, or through budgetary support, Prabhu said that given the state of public finances, railways need large funds from the private sector.
Explaining the need for capital investment, the minister, who was praised for his radical reforms in the power sector during his tenure in the previous NDA ministry, said "for improving rail infrastructure we need to invest 10 per cent of the total infrastructure GDP of $2 trillion over next five years.
"This means we need to invest USD 200 billion annually in the railways over the next five years, after which we need an annual investment of 1.5 times more than this (or $350 billion) for the next five years," Mr Prabhu said.
Offering a break-up of rail finances, he said it has three main sources of revenue generation - passenger and freight fares, and budgetary support.
However, Mr Prabhu said that while as much as 65 per cent of the rolling stock was passenger trains, they generate only 30 per cent of revenue, leaving 70 per cent of revenue to be mobilised by freight trains, which constitute only 35 per cent of the rolling stock.
On rail modernisation plans, he said the national transporter is on its way to constructing 400 model railway stations this fiscal year. He also said that as many as 79 of the announcements made in the rail budget for the year have already been implemented.
On involving the states in railway development, he said,
"We have already signed MoUs with Maharashtra and Odisha and are on our way to doing the same with a total of 17 states."
He added that Maharashtra has agreed to pump in Rs 10,000 crore over the next 10 years.
"On the part of the Railways, we will be investing Rs 70-80,000 crore in Maharashtra over next five years," he said.
Talking about the dedicated freight corridor project, he said that out of the Rs 82,000 crore approved by the Cabinet last month, railways has already floated tenders for Rs 19,000 crore.
On the two proposed locomotive units with FDI participation - one electric and the other diesel - he said tenders will be floated by the end of this month and a number of MNCs have evinced interest in the project.