LIC to invest Rs 1,500 bn in Indian railways

Wednesday 25th March 2015 05:58 EDT

The Life Insurance Corporation (LIC) has agreed to invest Rs 1,500 billion in Indian railways for modernization and upgradation of its infrastructure over the next five years. The investment would be made in bonds issued by various railway entities such as Indian Railways Finance Corporation (IRFC), beginning next fiscal.

An MoU was signed between LIC and the transporter with railway minister Suresh Prabhu terming it as a “win-win situation” for both organizations. Finance minister Arun Jaitley said, “LIC has taken the task of supporting Indian Railways... It is a commercial decision.”

There will be a five-year moratorium on interest and loan repayment and the rest of the terms would be negotiated while signing the finance assistance agreement. At a time when the state-run transporter is reeling under financial stress and finding it hard to modernize and execute pending projects, the funding comes as a big boost.

Prabhu said with such encouraging initiatives, the railways will be able to augment its resources for speedier execution of projects. The MoU is seen as a big achievement for Prabhu as he managed to mobilize the funds within 15 days of his budget announcement.

Prabhu had indicated meeting part of the gross budgetary support of Rs 1,000 billion for 2015-16 through extra budgetary resources, such as market borrowings by tapping lowcost, long-term funds. LIC will be subscribing to bonds worth Rs 300 billion on an average every year over the next five years.

The finance minister also highlighted the need for an improvement in the performance of railways.

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