The Government of India and Asian Development Bank (ADB) signed here yesterday a $130 million loan to help India improve rail services along some of its busiest and most critical freight and passenger transport routes. The second tranche loan is part of the $500 million Railway Sector Investment Program approved by ADB in 2011, and will finance track components for 840 kilometers of additional tracks along existing railway lines.

The signatories to the loan were Mr. Nilaya Mitash, Joint Secretary (Multilateral Institutions), Department of Economic Affairs, Ministry of Finance, on behalf of the Government of India; and Ms. M. Teresa Kho, Country Director (INRM), on behalf of ADB. The project agreement was signed by Mr. Satish Agnihotri, CMD, RVNL.

Mr. Mitash said the investment program targets busy freight and passenger routes in the states of Chhattisgarh, Orissa, Maharashtra, Karnataka and Andhra Pradesh, including the critical ‘Golden Quadrilateral’ corridor that connects Chennai with Mumbai. Many of the lines traverse through impoverished rural areas and carry large number of passengers and huge quantities of minerals and other economically important freight.

M. Teresa Kho, Country Director of ADB’s India Resident Mission said that the improvements in rail infrastructure will help deliver more energy efficient, safe, reliable, and environmentally-friendly rail services along key high-density routes. This will result in direct and indirect economic opportunities for about 21 million people in program areas who will benefit from faster travel times, lower costs, and improved links to markets, production centers, and social service facilities.

The second tranche from the ordinary capital resources of ADB has a 25-year term including a grace period of 5 years, commitment charge of 0.15% per year (on un-drawn balance), Maturity Premium of 0.10% (by straight line method)and interest rate to be determined in accordance with ADB’s LIBOR-based lending facility. The Government of India will provide counterpart finance of more than $97.2 million to cover the balance of the costs of the second tranche which is estimated at more than $227.2 million. The Ministry of Railways carries out the program which is due for completion by December 2018.

Infrastructure loan agreement enables expanded rail track upgrades to improve efficiency, safety and market access on key routes. A tranche of a multi phase Railway Sector Investment Program was financed to construct 840 kilometers of additional track on existing lines, implemented by the Ministry of Railways to improve efficiency, safety, reliability and environmental performance on high density freight and passenger corridors. The loan features long term concessional terms including a multi year tenor with a defined grace period, commitment charges on undrawn balances, a maturity premium by straight line method, and an interest rate linked to the lender's LIBOR based facility; the borrower provides counterpart finance for remaining costs.