ADB Provides $750 Million Loan to Indian Railways for Transitioning to Electric Power

The Indian Railway Finance Corporation (IRFC) has signed an agreement with the Asian Development Bank (ADB) for the electrification of railway tracks.

This initiative is part of a broad modernization program that will help India’s railway sector transition to electric power and away from dependence on fossil fuels, ADB said in a media statement.

ADB has said it will provide $750 million (₹52.20 billion) in long-term financing, the largest single non-sovereign loan ever committed by the ADB.

Concurrently with the loan agreement signing, risk participation agreements have also been signed with private risk participants for the project. IRFC, an entity owned by the government of India, will use the proceeds from the loan to install electric traction equipment along approximately 3,378 kilometers of existing railway lines, which will enable the migration of passenger and freight traffic from diesel to electric traction. The electrification assets will be leased to Indian Railways under a long-term lease agreement.



“This is a flagship project demonstrating ADB’s strategy of supporting key state-owned enterprises in strategic sectors. It also reflects a major push by the private sector operations of the ADB into transport infrastructure, and particularly railways, a sub-sector in which traditionally such operations have not contributed a great deal,” said Diwakar Gupta, ADB’s vice-president for private sector operations and public-private partnerships.

The government of India has placed significant emphasis on investing in infrastructure and has developed a 5-year program with $132 billion capital expenditure for the modernization of Indian Railways. The program comprises network expansion and decongestion; enhancement of safety and passenger amenities; development of dedicated freight corridors; station redevelopment; and procurement of rolling stock and other related assets. The electrification of railway tracks is part of this master plan, which is critical for the movement of goods and people within the country, the release informed.

IRFC was set up in 1986 as the financing arm of Indian Railways for mobilizing funds from domestic and international capital markets. It is fully owned by the government and is registered as a non-banking finance company.

Indian Railways is going green in a big way and plans to become a net-zero carbon emitter by 2030, Union Railways Minister Piyush Goyal had announced last year. Indian Railways is the single largest consumer of electricity in the country, with an approximate 2% share of national energy consumption.

Previously, Mercom also reported that Indian Railways plans to float tenders for the development of solar projects that will expand the company’s footprint in the Indian solar sector.