IRFC is a dedicated financing arm of the ministry of railways. It helps raise money from the market to part finance the plan outlay of Indian Railways and is used for acquisition of rolling stock assets and for meeting other developmental needs of the Indian Railways. Rolling Stock assets funded by IRFC are leased to the ministry of railways, which pays lease rentals to the company every half year. In turn, the railways offers letters of assurance to the financing body on meeting lease rentals payments due to them and also to account for these rentals in the railway Budget. A senior railways officer added these letters at present, serve as an undertaking for IRFC’s external commercial borrowings.
According to IRFC’s website, the railway ministry has so far made repayments in respect of assets valued at Rs 21,065.68 crore and around 50 per cent of the revenue-earning rolling stock assets operating on the Indian Rail network are funded by IRFC.
“An arrangement exists for IRFC’s debt payments being committed by the Ministry of Railways in case of difficulties experienced by the company. Not only does the annual borrowing target of IRFC carry approval of the Parliament of India but also Ministry of Railways debt servicing obligation is committed by the Parliament each year,” according to a presentation put up on the IRFC website. Whether this can continue, is an issue that remains to be resolved.
Whether the Railway ministry can continue to offer such assurances or other options like the finance ministry extending similar letters is yet to be decided.
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