IRFC, World Bank may fund govt's Rs 1-trn plan to upgrade railway stations

The government’s ambitious Rs 1-trillion station redevelopment programme is likely to get funding from the Indian Railway Finance Corporation (IRFC) and the World Bank.

According to multiple sources close to the development, the Indian Railway Stations Development Corporation (IRSDC), the nodal agency for station redevelopment in the country, is in the final stages of securing a Rs 541-crore loan from IRFC. This amount will be used for Anand Vihar, Bijwasan and Chandigarh stations. It will be the first such move by IRFC, the borrowing and financing arm of the Indian Railways, to finance station redevelopment.

Discussions are also on with the World Bank for funding of some other railway stations.

Earlier this year, IRSDC came out with a list of stations inviting private equity players and pension funds for partnerships to fund redevelopment of at least 10 high-potential stations. According to the Railways sources, major players including Macquarie, CDPQ Private Equity, National Investment and Infrastructure Fund and sovereign funds are likely to be part of the exercise. Sources say funds are now looking at more concessions in commercial redevelopment. 

“IRSDC has informed the Railways that it is unbundling its business into three verticals — station redevelopment, station operations and management and finally commercial redevelopment. For the station redevelopment component, IRSDC will be taking loan from IRFC,” said a government official.

The Rs 541-crore loan from IRFC is expected to be repaid through land monetisation. The government’s plan was to redevelop at least 600 stations at an investment of Rs 1 trillion.

Of this, around 50 stations are being taken up by IRSDC immediately with an investment of around Rs 20,000 crore. 

“What IRSDC is working on is not a loan model. In this case, equity in stations will be leveraged to raise debt,” said an industry source. As part of the new operations and maintenance vertical, IRSDC has recently taken up the operations and management of five stations — Anand Vihar, Chandigarh, Secunderabad, Pune and Bengaluru city.

Currently, redevelopment work is going on at two stations — Habibganj and Gandhinagar — which are expected to be commissioned by February and March, respectively. Since IRSDC has no project development fund, it had recently tied up with five public sector undertakings — NPCC, Engineering Projects, MECON, RITES, Bridge & Roof Co — allocating to them the planning and feasibility work for 39 stations. 

“Initially, they are putting in their money. Once the contracts are awarded, they will be getting a share of the premium,” the government official added. However, IRSDC has cautioned them that if the contract is not awarded in three years, they will be paid an 8 per cent return on the expenditure.

Interestingly, some state governments like Odisha have approached IRSDC for redeveloping stations like Bhubaneswar “highlighting the state’s culture” by themselves.