LIC to invest Rs 1.5 lakh crore in Indian Railways over 5 years

The investment, of Rs 30,000 crore annually, would be made through bonds issued by IRFC

Indian Railways signed a memorandum of understanding (MoU) with state-run Life Insurance Corporation (LIC) on Wednesday, to raise Rs 1.5 lakh crore over the next five years beginning this April.

The investment by LIC, to be made through Rs 30,000 crore of bonds issued annually by rail entities such as Indian Railway Finance Corporation would be channelised by the railways in capacity augmentation projects. The bonds will come with a five-year moratorium on interest and loan repayment.

Rail minister Suresh Prabhu said the increased resources would lead to speedier execution of projects, enhanced traffic output and the ability to meet transport demand and ultimately a robust economy. “It is a significant step. There is money with honey because this is coming at such a rate which is good for LIC and good for us,” he said, without sharing the interest rate for bonds.

Finance minister Arun Jaitley said it was a commercial decision by LIC to invest in Railways, which should improve its performance. “Railway journey has to be a matter of comfort and not compulsion. Therefore, the quality of Railways has to hugely improve,” he said.

Jaitley also called LIC a commercial and financial giant and “an example of how state institutions can grow so huge, grow professionally, and serve the country”. Pabhu hailed the MoU as the first step for Railways in becoming profitable, commercially viable and to expanding operations.

In his Budget Speech last month, Prabhu had announced that a part of the total Plan Budget of Rs 1,00,011 crore for FY16 would be met through extra-budgetary resources such as market borrowings by tapping low-cost and long-term funds.