After bailing out numerous disinvestment programs of the Indian government, Life Insurance Corporation will now invest massive money in Indian Railways.
State-run insurance major LIC today committed Rs 1.5 lakh crore to the Indian Railways for development of various commercially viable projects in one of the largest railway networks in the world.
The investment would be made over a period of five years.
"LIC has taken the task of supporting Indian Railways... It is a commercial decision... LIC will invest Rs 1.5 lakh crore over a period of five years," Finance Minister Arun Jaitley said here.
The investment would be done in bonds issued by various railway entities such Indian Railways Finance Corporation (IRFC), beginning next fiscal.
On an average, LIC will be subscribing bonds worth Rs 30,000 crore over next five years, its Chairman S K Roy told PTI after the signing of MoU between Indian Railways and LIC.
When asked about that what kind of interest rate LIC would earn from this investment, Roy said, "The rate is yet to be finalised. Since it is would be a commercial decision, it would be win-win situation for both."
Describing LIC as a financial giant, Finance Minister Arun Jaitley said, "LIC's credibility in its area of operation is well known, that is why crores of policy holders have faith in it.
"They trust their money in LIC more than anywhere else. That is why LIC has become a financial giant. LIC can make markets move. LIC at times can also support the government's disinvestment programmes."
Railway Minister Suresh Prabhu said this is a first step for railway becoming profitable, commercially viable and expanding its operation.
Prabhu, in his Rail Budget speech, had announced that an investment of Rs 8.50 lakh crore is going to made in Railways in next five years. "I will inform Parliament also about how we are going to raise the money."
He said, "Railways cannot survive without investments. If we rely only on gross budgetary support from Finance Ministry then it will not help."
Hoping that fund infusion will improve efficiency of Railways, he said, "This will enhance the ability of Railways to earn more, decongest the railway line, increase the freight volume. It can only happen when we create capacity and for this we need investment."
Praising Prabhu's Rail Budget, Jaitley said, "Instead of going for empty populism, he concentrated on strengthening the resources.
"Therefore, he set himself for a very clear task. He has a challenge before him. I am glad that he maintained that we cannot additionally keep taxing people."
On an average, LIC will be subscribing bonds worth Rs 30,000 crore over next five years, its Chairman S K Roy told PTI after the signing of MoU between Indian Railways and LIC.
When asked about that what kind of interest rate LIC would earn from this investment, Roy said, "The rate is yet to be finalised. Since it is a commercial decision, it would be a win-win situation for both."
Roy further said that 30 years will be the tenure of the bonds but the disbursements will happen over a period of five years.
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