Budget 2023 | IRFC's market borrowing in 2023-24 to be nil

The Railways ministry's Internal and Extra Budgetary Resources have fallen to Rs 52,783 crore in 2023-24 from Rs 95,943 crore in 2022-23. (Representative image)

Indian Railway Finance Corporation (IRFC), the market borrowing arm of Indian Railways, will not borrow any money in the form of debt in financial year 2023-24, according to Budget documents.

The government has listed IRFC's Internal and Extra-Budgetary Resources (IEBR) as negligible in 2023-24, indicating it will not look to borrow money to fund its capital expenditure.

In 2022-23, IRFC's IEBR was set at Rs 66,500 crore as part of the Budgetary allocations. As part of the government's revised estimates, IRFC's IEBR for 2022-23 will come in at Rs 48,500 crore in 2022-23. In 2021-22 IRFC had borrowed Rs 60,683.41 crore from the market.

IEBR comprises funds by way of profits, loans and equity.

IRFC’s borrowings are used to buy locomotives, wagons and coaches and fund projects.

Railway Minister Ashwini Vaishnav on February 3 confirmed that IRFC's IRBR has been set at nil under the Budget.

"IRFC has strong financials and has enough money to continue operations in 2023-24," the minister said.

He added that the weakness of the international bond markets was not a factor in cutting IRFC's market borrowing under the Budget to nil.

As of September 30 2022, IRFC's cash and cash equivalents stood at Rs 8,722.784 crore. The company's total assets stood at Rs 4.65 lakh crore.

The move to not borrow from the market comes in the backdrop of the central government increasing its Budgetary allocation to Indian Railways to Rs 2.45 lakh crore, which is 65.6 percent higher when compared to 2022-23.

"The need to borrow from the market is likely to be minimal in 2023-24 as the Budgetary allocation by the central government to Indian Railways is high for 2023-24," a senior railway official said.

He added that most of Indian Railways’s capital expenditure in 2023-24 will be funded by the central government.

The move to cut IRFC's market borrowing is indicative of the fact that the government is looking to borrow less from the market to fund capital expenditure and rather push for asset monetization and divestment to raise funds, another senior railway official said.

"The government is pushing for divestment and asset monetization, which is why market borrowing has been set as zero for 2023-24. If there is an urgent need for funds,Indian Railways will consider borrowing from the market," the second official said.

The push for divestment and asset monetization can also be seen by the government's move to set the National Highways Authority of India's IEBR as negligible in 2023-24.

This is the second straight year that the NHAI's market borrowing has been set as negligible.

In 2022-2023, the government had asked the highway developer to limit its borrowings. In the 2022-23 Budget, the government projected that NHAI’s IEBR would fall to around Rs 1 lakh crore, from Rs 65,000 crore  in 2021-22.

As per the government's revised estimates, the NHAI will spend Rs 798 crore as IEBR in 2022-23.