Cooperative Federalism: Indian Railways To Share Loan Guarantees And Cost Of Feasibility Studies With States

Indian Railways will amend its Suburban Rail Systems 2017 policy following differences with various states, Mint has reported. These amendments address the concerns of the states according to a railway official who spoke to Mint.

“The 2017 policy is under revision to address perceptions of the state governments and make it a 50:50 partnership in the true sense,” the railway official told Mint.

Under the existing policy, development of suburban railways would be taken up by a special purpose vehicle (SPV) that will have equal equity participation by the Indian Railways and the state government.

The total equity contribution in the project should be under 40 per cent of the capital cost as per the policy. The remaining 60 per cent cost of the project is to be met by the SPV through loans or any other source of funds. Guarantees for the loans to be taken by the SPV was to be provided by the state government under the old policy.

Under the revised policy, the Indian Railways will share the loan guarantee for suburban rail projects jointly with the states, unlike the previous policy where states alone were expected to provide the loan guarantee. In addition to the Railways has also agreed to share the cost of feasibility studies for suburban rail projects.