ADB to extend $500 m loan to Indian Railways

Mony K. Mathew Kozhikode | Updated on September 02, 2011


The Asian Development Bank (ADB) has approved loans of up to $500 million to the Indian Railways to improve services along some of the busiest freight and passenger routes.

The multi-tranche facility is meant to finance additional lines and electrification of long stretches of the existing track network, along with installation of signalling systems. The bank will also help the Railways go in for accounting reforms to enhance its operational efficiency.

The investment programme will focus on busy freight and passenger routes in Chattisgarh, Orissa, Maharashtra, Karnataka and Andhra Pradesh, as also the ‘Golden Quadrilateral' corridor connecting Chennai, Kolkata, Mumbai and New Delhi. It is pointed out that besides passengers, many of these lines carry large quantities of minerals and other economically important freight.

The funds will be released in tranches with an initial loan of $150 million from ADB's ordinary capital sources. It will have a 25-year term, with a grace period of five years, and the interest rate will be set in accordance with the bank's LIBOR-based lending facility, according to an ADB report.

The total cost of the investment programme is estimated at over $1.1 billion and the Indian Government will provide counterpart finance of around $644 million to cover the balance of the cost.

The report notes that railways is the heart of India's transport sector, carrying an average of more than seven billion passengers and over 800 million tonnes of freight annually. But, institutional constraints and lack of investment in new infrastructure have kept the railways struggling to keep up with the rise in traffic.

A significant feature of the programme, which is scheduled for completion by December 2018, is the stress on climate change mitigation. It is expected that there will be large-scale reductions in carbon emissions with the shift of bulk goods from road to rail transport.

Published on September 02, 2011

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