Railways to receive Rs 1.5 lakh crore LIC investment

New Delhi, March 12, 2015, DHNS:

Cash-rich public sector insurance firm Life Insurance Corporation (LIC) on Wednesday pledged to invest Rs 1.5 lakh crore in resource-starved railways over the next five years.
The fund, to be used in development of various railway projects, would be made available through bonds issued by the arms of Indian Railways, such as the Indian Railways Finance Corporation (IRFCL).

LIC gets around Rs 2 lakh crore per year from premia. It parks 25 per cent of that into equity markets. The remaining is channeled into risk-averse investments such as government bonds.
“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.
An MoU to this effect was signed between LIC and the Ministry of Railways. Investments would begin from April and there would be a five-year moratorium on interest and loan repayment.

Jaitley said LIC was a great commercial giant and is an example of how state institutions could grow so huge, professionally, and serve the country. He, however, emphasised on the need for improvement in the performance of the Railways.
“The Railways has a long history. But it has to be expanded and run professionally.
Railway journey for passengers has to be a matter of comfort and delight. It can’t be a matter of compulsion with no option. Therefore, the quality of Railways has to hugely improve,” he said.

The rail Budget presented last month had projected a plan size of Rs 1 lakh crore for the next fiscal year. Rs 17,136 crore of this was expected to be raised by institutional financing.

Railway Minister Suresh Prabhu termed the signing of MoU between Railways and LIC as a “marriage” between two major organisations of the country that would be a “win-win situation” for both.