The project is part of a broad modernisation programme to assist India’s railway sector transition from dependence on fossil fuels to electric power.

Along with the loan agreement, risk participation agreements were also signed with private risk participants.

IRFC will use the funding to electrify approximately 3378km of existing lines, which will enable the migration of passenger and freight traffic from diesel to electric traction. The electrification assets will be leased to national operator Indian Railways under a long-term lease agreement.

The Indian government has developed a five-year, $US 132bn capital expenditure programme to modernise the country’s railway network, which 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.

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

“ADB is adding value in this transaction by providing and mobilising long-term, non-recourse project financing for critical infrastructure development,” says director general of ADB’s private sector operations department, Mr Michael Barrow.

“A significant value addition is the mobilisation of private capital through risk participations with the private sector. As the aggregate funding requirement of Indian Railways is quite substantial, ADB is partnering with it to help tap into a diverse set of funding sources.”