Mamuni Das
Harish Damodaran

New Delhi, Feb. 15

AT a time when the economy is on song, the familiar old story of the country's creaking infrastructure not keeping pace with resurgent industrial growth has resurfaced. After the congestion at major ports, it is rail traffic that is now bursting at its seams, courtesy a severe shortage of wagons.

The Railways is currently operating its freight network at near-full capacity, an indication of which is the fact that the earnings from goods during April-January 2004-05, at Rs 24,764.93 crore, have been Rs 1,180.75 crore higher than what was budgeted for this period. And precisely when its demand for wagons has shot up, the Railways is confronted with a supply bottleneck.

According to Rail Ministry sources, so tight is the supply position that even if orders are placed now, "the delivery will not happen before one-and-a-half years". All main wagon makers - Texmaco, HEI Ltd, BESCO, Modern Industries, Burn Standard and Braithwaite - who, not long ago, were complaining about poor offtake from the Railways are today "loaded with orders".

One result of all this is that the Indian Railway Finance Corporation (IRFC) has scaled down its borrowings target for the current fiscal to Rs 3,000 crore from the budget estimate of Rs 3,400 crore.

The Railways' rolling stock requirements are primarily met through borrowings contracted by the IRFC, which uses the monies to acquire locomotives, freight wagons and passenger coaches and leases them out to the former for a 15-year period.

"We can easily raise the entire budgeted amount of Rs 3,400 crore from the market. But this money would be idle if it cannot be deployed for acquisition of rolling stock. So, instead of paying additional interest, it is prudent to borrow less," a senior IRFC official told Business Line.

During the current fiscal, the Railways' resource-raising arm has so far mobilised Rs 2,153 crore, which includes Rs 1,597 crore through domestic borrowings and Rs 556 crore from external commercial borrowings.

Roughly half of the domestic borrowings have been from 15-year bonds at about 6.8 per cent and the rest through five-year loans from nationalised banks at 6 per cent.

As for overseas borrowings, totalling $125 million (Rs 556 crore), $100 million has been raised through dollar-dominated loans at 3 per cent (70 basis points above Libor) and $25 million in yen loans at 1.85 per cent for five-year tenors.

"We intend to mop up the balance amount of the revised borrowings of Rs 3,000 crore from the overseas market. A favourable factor here is the upgradation of our long-term foreign currency rating from `BB' to `BB+' (stable outlook) by Standard & Poor's early this month, in line with the country's improved sovereign rating," the official said.

During 2003-04, IRFC mobilised Rs 2,735.27 crore, which included Rs 1,570 crore through taxable bonds, Rs 50 crore from tax-free bonds and Rs 684.84 crore of domestic term loans. The remaining borrowings comprised a foreign currency loan of $80 million (Rs 357.22 crore) and another $16 million (Rs 73.21 crore) as export credit from EDC/Canada for procurement of spare parts.

The average cost of its borrowings for the year was just 5.59 per cent, with a weighted average tenor of nearly eight years.

(This article was published in the Business Line print edition dated February 16, 2005)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.