Indian Railways’ foreign projects to boost relations

The Indian Railways has been helping set up rail infrastructure projects in Africa, West Asia and Southeast Asia to enhance bilateral relations and to boost trade and investment ties, both of which will improve India’s stand in international forums

April 6, 2018

India has so far committed US$24.2 billion in soft loans for rail and other infrastructure projects to over 60 countries in the past 14 years

Right from the 80s, Indian Railways has worked on railway projects overseas, hoping to tap into the growing market of rail construction

A majority of the financing for India’s international rail diplomacy is channelled through Exim Bank, which typically extends lines of credit (LOC)

IRCON, an Indian agency, is constructing the 500-km Chabahar Zahedan railway line from Chabahar port in Iran to hinterlands in Afghanistan

Over the decades, India has been a steady force in providing financial and technological assistance to a variety of essential schemes and projects in numerous countries around the world. In this effort, Indian Railways has been a leading avenue of offering the Government’s assistance to its strategic partners.  For many years now, Indian Railways, the world’s fourth largest rail operator, ferrying more than 23 million passengers daily on its over 12,500 trains, has been quietly engaged in providing financial aid, technical assistance, while constructing railway infrastructure in developing countries of Africa and Southeast Asia. The Government-run agency has also shared its vast experience and expertise with nations in West Asia.

India’s provision of aid, adopted systematically since 2003, is not only about enhancing the flow of trade, investment and resources with its partner countries, but also to actively participate in the human development of these nations. India has so far committed US$24.2 billion in soft loans for rail and other infrastructure projects to over 60 countries in the past 14 years. Back in the 80s itself, Indian Railways, through its subsidiary IRCON International Ltd, earlier known as Indian Railway Construction Company, has worked on turnkey railway projects overseas, hoping to tap into the growing market of rail construction in developing countries. The first opportunities for Indian railways came from Iraq and Algeria.

Algeria and Iraq

In the mid-80s, the railway infrastructure in the North African nation of Algeria was in urgent need of upgrading, which was provided by the Indian Railways. Under challenging working conditions, the agency completed two new railway lines on a turnkey basis at a cost of US$100 million. India’s role in building this critical infrastructure project cemented a strong bond between the two countries. Both sides stand by each other on vital issues on bilateral and multilateral platforms even today. Today, IRCON considers Algeria’s state railway company as a valuable client and continues to build railway projects in the country.

In Iraq, India’s deep historic relation with the nation has led to several relief and aid projects, including the redevelopment of railway infrastructure. In the mid-80s, besides training Iraqi pilots, manning their healthcare system and rejuvenating their agriculture sector, India built US$350 million high-speed railway line and another one costing US$130 million. Recently, the India has entered into an agreement with the United Arab Emirates on technical cooperation in the rail sector, including rail safety, station redevelopment, provision of locomotives, coaches and wagons, among others.

A majority of the financing for India’s international rail diplomacy is channelled through Exim Bank, which extends lines of credit (LOC) – a soft loan with concessional interest rates coupled with a rider that certain percentage of the goods will be sourced from India

 

Role of Export–Import Bank of India (Exim Bank)

A majority of the financing for India’s international rail diplomacy is channelled through Exim Bank, which extends lines of credit (LOC) – a soft loan with concessional interest rates coupled with a rider that 70 per cent of the goods will be sourced from India. Exim Bank has  financed railway projects in many African nations such as Ghana, Senegal, Mali, South Africa as well as in Sri Lanka. Most of the African nations feature inadequate rail infrastructure. The anticipated need for investment on rail network, including construction of stations and terminals, in a country such as Ghana is US$21 billion as per a 2015 Exim Bank report “Realising Export Potential of the Railways and India hopes to tap into this opportunity. Not just in Ghana, India has built rail networks in other African countries such as Senegal, Mali, and Mozambique as well.

Development of rail network in Ghana has opened up new trade and investment opportunities, including those involving Indian companies. In November 2016, Exim Bank extended a credit of US$398 million for design and construction of an 84 km-long railway line and railheads linking Ghana’s southern and northern territories. This project will be executed by one of India’s largest construction companies, Afcons Infrastructure Ltd.

In March 2018, Exim Bank pledged US$500 million credit facility to Ecowas Bank for Investment and Development (EBID) to fund a variety of crucial developmental projects across 15 countries of the West Africa region – Benin, Burkina Faso, Cape Verde, Cote d’Ivoire, Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo. The Economic Community of West African States (ECOWAS) has a mandate to promote economic integration in all fields of activity of the constituting countries. India has also been keen to help redevelop Sri Lanka’s railway infrastructure. Exim Bank is involved in the  redevelopment of infrastructure in the country’s northern territories. Till date, the Indian Government has provided loans worth US$996 million, to develop Sri Lanka’s railway service. In July 2016, the Cabinet had approved a US$318 million LOC through Exim Bank to Sri Lanka for upgrading two important railway lines in the north.

The Rail Connect to India’s neighbours

The historic Janakpur rail network connecting Nepal and India was once a major border crossing for citizens on both sides. The British built the 20-mile track in 1937 to carry timber from the once heavily forested areas of Janakpur into India. The reconstruction of the railway line, which was a lifeline for the small frontier town of Janakpur, is being largely funded by New Delhi. It is expected to be completed this year and will help boost the economy of landlocked Nepal. In April 2017, Exim Bank extended LoCs worth US$2 billion and US$862 million each to Bangladesh, for supply of railway wagons, passenger coaches, diesel electric locomotives and for construction of railways bridges and railway lines, among other projects. India has also just completed constructing the second Bhairab railway bridge in Bangladesh, a project handled by IRCON.

IRCON and RITES

IRCON International has completed over 100 projects related to laying of new railway lines, bridges, and rehabilitation of tracks in 21 nations such as Iraq, Sri Lanka, Bangladesh, Malaysia, Algeria, Mozambique, Bangladesh, Brazil, UK and Ethiopia. Ongoing projects include construction of embankment, track, civil works, major and minor bridges at a cost of around US$147.80 million in Bangladesh; and construction of a railway station as well as signalling and telecom tracking system in Malaysia. Currently, IRCON’s most important project is the construction of the 500-km Chabahar Zahedan railway line from the strategic Chabahar port in Iran, as part of a transit corridor through Afghanistan. It will undertake the superstructure work and finance the project with a budget of US$1.6 billion.

RITES, another entity of Indian railways, operates in 55 countries, exporting locomotives, coaches, wagons, DMU train sets and other related equipment. The markets include Bangladesh, Myanmar, Sri Lanka, Mozambique and other African countries. Some projects by RITES include feasibility studies for laying tracks and electrification in Nepal and Ethiopia.

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