Indian Railways is likely to borrow a record Rs 42,000 crore in 2018-19 to fund its capacity expansion programme. The amount, to be raised by the Indian Railways Finance Corporation (IRFC), is Rs 7,000 crore or a fifth more than the total borrowings of the national transporter in the current fiscal.

The ministry plans to utilise the funds for high traction projects such as doubling of important freight corridors, electrification of tracks along dense routes and procuring of rolling stock including German technology based LHB passenger coaches and electric engines, officials said. Nearly Rs.22,000 crore of the total borrowings will be raised by IRFC from markets while the remaining amount would come from the Life Insurance Corporation of India, said a senior official, who did not wish to be identified.

Indian Railways has been steadily raising its borrowing through Indian Railways Finance Corporation in the past five years. Railway Minister Piyush Goyal recently announced that IRFC, which currently acts as the financial arm of railways and which the government plans to list, will soon get into new streams of business. Currently, more than 60% of the funds raised by IRFC meet the rolling stock requirement of railways.

The remaining funding is for project financing. Goyal had said last week that the railway ministry wasn’t solely looking at funds from the finance ministry but also planned to undertake a massive asset monetisation programme. The railways is planning to monetise assets including its prime land bank and power transmission lines to raise more than Rs 30,000 crore. The move to step up borrowings must be accompanied by radical reforms to raise earnings. Rail finances will improve only when the when the practice of freight and upper-class passengers subsidising lower-class fares ends. The government has announced a rail development authority, but the regulator should have the powers to set tariff and settle contractual disputes in private public sector partnerships must be in place. It makes sense to recast the railway board on a corporate model to improve finances. For the next financial year, the national transporter has proposed a plan outlay of Rs 1.46 lakh crore and has approached the finance ministry to provide almost Rs 60,000 crore as gross budgetary support.