The Hindu Business Line : Railways seeks SLR status for IRFC bonds

THE Ministry of Railways has sought statutory liquidity ratio (SLR) status for the bonds issued by its subsidiary, the Indian Railways Finance Corporation (IRFC), which borrows funds for the organisation from the open market.

"The Ministry of Railways has taken up the issue with the Finance Ministry to enable IRFC to access funds at competitive rates of interest. The corporation is now planning to expand its horizons and we want it to get into project financing for the Railways," a senior Railway board official told Business Line.

Till now, IRFC had been procuring rolling stock (locomotives, coaches and wagons) and leasing it out to the Railways. But with large investments planned by the Railways to augment its golden quadrilateral and diagonal projects and complete all sanctioned works through special schemes, Rail Bhawan is looking at IRFC to raise funds from the market.

The Railways, currently, has a shelf of about Rs 45,000-crore worth of pending projects. The Railway Minister, Mr Nitish Kumar, has announced a new `Remote Areas Rail Sampark Yojana' in his interim Budget to take over financially unviable but socially desirable projects worth about Rs 25,000 crore under the new scheme and ensure their completion in the next five years.

IRFC has already made an exception in the case of RailTel Corporation of India Ltd by raising Rs 100 crore for the telecom venture of the Railways. The corporation has also agreed to partly fund some port connectivity projects.

"We want IRFC to play a greater role in project financing and raise resources for viable projects," the official said.

With reducing interest rates, the Railways is now able to borrow at a lower rate. The average interest cost to it has fallen to about 10 per cent from nearly 15 per cent just four years ago.

Meanwhile, a peculiar situation has arisen where the Railways is paying a higher amount to IRFC as lease charges than what it gets from the corporation as market borrowings.

"It is to correct this anomaly that we have sought SLR status for IRFC bonds and asked the corporation to expand its scope of work. The corporation's article of association does not restrict it from entering into project finance," the official said.