In the highest-ever funding for the Indian Railways, Life Insurance Corp of India (LIC) has committed Rs 1.5 lakh crore for development of rail projects over the next five years.
The investment would be made through bonds issued by rail public sector undertakings such as the Indian Railways Finance Corp (IRFC).
LIC will subscribe to bonds worth Rs 30,000 crore on an average every year over the next five years. The agreement provides for a five-year moratorium on interest and loan repayment. LIC chairman SK Roy said the rate of return was yet to be finalised.
The state-run insurance behemoth and the ministry of railways signed a memorandum of understanding in this regard, which railway minister Suresh Prabhu termed as a “marriage” between two major organisations of the country that would be a “win-win situation” for both.
“LIC had taken a commercial decision of supporting the Indian Railways,” finance minister Arun Jaitley said at the event.
The railway budget had committed to generate extra budgetary resources (EBR) to finance rail projects. Sources said the EBR funds were largely likely to be diverted for modernising the clogged tracks on high density routes of the railways and expansion of some existing routes.