Rlys to seek clarity on loan component for Dedicated Freight Corridor

The Union Budget for 2013-14 holds a hidden surprise for the Railways.

The Finance Ministry has included the funds meant for the dedicated freight corridor as a part of its gross budgetary support (GBS) for the Indian Railway next year.

This is a double whammy for the Railways. Not only will the inclusion of the freight corridor funds in the budgetary support means that there are less funds available for other projects, but it is also not clear what portion of funds that should be treated as a loan.

From a Railway perspective, a loan can be repaid over specific tenure, where as budgetary support will mean a dividend payout in perpetuity to the Finance Ministry.

The Railways will seek clarity from the Finance Ministry on this issue, a Railway source confirmed.

The dedicated rail freight corridors are being funded by the World Bank and Japanese funding agency JICA.

The funding agencies have a country level agreement with the Finance Ministry, which will then pass on the funds to Dedicated Freight Corridor Corporation Ltd (DFCCIL) through the Railway Ministry.

The Indian Railways has proposed to allocate over Rs 7,000 crore towards dedicated freight corridor next fiscal.

The GBS to the Railways is pegged at Rs 27,102 crore.

A Railway Ministry source confirmed, “The GBS provided to Railways includes allocation for dedicated freight corridor. We would seek clarity from the Finance Ministry on how much of funds should be treated as GBS and how much as loan. This is a grey area.”

Out of the funds allocated this year towards DFCCIL, how much will be spent on each of the freight corridors in current fiscal – the eastern and western arms – will be clear by the end of next year, added the source.

JICA is part funding the eastern corridor, while the World Bank is part funding the eastern corridor.

debt service obligation” fund

Incidentally, the Railways has introduced a “debt service obligation” fund next year, with a proposed allocation of Rs 4,163 crore, which will be used to repay its debt to the World Bank and JICA.

Depending on the amount that gets treated as a loan from the Finance Ministry, the actual GBS component for the Railways will further go down by that extent.

mamuni@thehindu.co.in
(This article was published in the Business Line print edition dated March 5, 2013)

http://www.thehindubusinessline.com/todays-paper/tp-logistics/rlys-to-seek-clarity-from-finmin-on-loan-component-for-dedicated-freight-corridor/article4476325.ece

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