Press Information Bureau

Government of India

Ministry of Finance

10-July-2012 15:11 IST

ADB Extends $150 million loan to Develop India’s Railway System

Asian Development Bank (ADB) and the Government of India have signed a US$ 150 million loan for 1st tranche of Railway Sector Investment Program aimed at improving rail freight services and passenger transport routes.

The program will help India improve rail services along some of its busiest freight and passenger transport routes, providing double-track for about 840 kilometers of rail routes and electrifying about 640 kilometers. New signaling will also be installed. ADB will also support accounting reforms to improve operational and financial efficiency at Indian Railways.

The program will (i) reduce fuel consumption and enhance energy efficiency, (ii) reduce pollution, (iii) enhance railway safety, (iv) increase the line capacity, benefiting consumers and producers of goods and services, (v) improve staff productivity, and (vi) incorporate innovating financing modalities by pursuing carbon credits under UNFCCC.

The total cost of the Railway Sector Investment Program is US$ 1,144.6 million, out of which loan assistance from ADB is US$ 500 million (in four tranches) and GOI’s funding is US$ 644.6 million. This is the 1st tranche for a total US$ 343.4 million (ADB loan US$ 150 million + GOI share US$ 193.4 million).

The signatories to the loan were Shri Venu Rajamony, Joint Secretary (Multilateral Institutions), Department of Economic Affairs, Ministry of Finance, on behalf of the Government of India; and Mr. Hun Kim, Country Director for India, on behalf of ADB. The project agreement was signed by Mr. Satish Agnihotri, Managing Director, Rail Vikas Nigam Limited.

Speaking on the occasion, Joint Secretary, Shri Venu Rajamony said that although railways make up a significant part of India’s transport sector, constraints on high density railway routes present a chronic challenge. This program should improve energy efficiency, safety, reliability, affordability, and environmental sustainability along key railway routes with heavy traffic, he said.

Mr. Hum Kim, Country Director for India said that our goal is to get people and goods moving more quickly and easily throughout India. Better railways not only help promote environmentally sustainable growth, they build better links between states and open opportunities to more people, he said.

The Indian Railways Vision 2020 highlights the need to remove infrastructure bottlenecks, design and deliver market-driven services, provide safe and reliable operations, and build capacity.

ADB will also provide a program linked technical assistance of US$ 300,000 to promote sustainable transport modes by monitoring carbon emission reductions from shifting bulk goods from road to rail.

Ministry of Railways is the Executing Agency (EA) and Rail Vikas Nigam Limited (RVNL) is the Implementing Agency (IA) for the program.

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DSM/SS/GN

Infrastructure financing supports railway capacity and efficiency improvements under multilateral loan tranches and promotes energy and environmental sustainability. ADB provided a US$150 million first tranche loan as part of a multi tranche US$500 million contribution to a US$1,144.6 million Railway Sector Investment Program, with the Government of India funding the balance; the Ministry of Railways is the Executing Agency and Rail Vikas Nigam Limited the Implementing Agency. The program finances double tracking, electrification, signaling upgrades and accounting reforms to improve operational and financial efficiency, increase capacity and safety, reduce fuel use and pollution, and pursue carbon credits under UNFCCC, with ADB providing program linked technical assistance to monitor emission reductions.