China’s Ministry of Railways (MOR) announced Tuesday it plans to auction 20 billion yuan ($3.15 billion) worth of bonds today to finance the construction of the country’s railway network.

The issuance will be overseen by the National Development and Reform Commission (NDRC), the top planning agency.

The bonds will be split into two tranches: 10 billion yuan worth of seven-year paper and 10 billion yuan worth of 20-year paper, according to the ministry’s announcement. The interest rate of the seven-year paper is between 5.13 to 6.13 percent, and that of 20-year paper is between 5.53 to 6.53 percent.

The State Council halved the income tax on earnings on the bonds issued by the MOR between 2011 and 2013 under the supervision of the NDRC, according to a statement released by the Ministry of Finance Monday.

“Obviously, the government’s move is helpful in easing the fundraising difficulties of the highly indebted MOR,” He Yifeng, a bond analyst at Beijing-based Hongyuan Securities, told the Global Times Tuesday.

He said the preferential tax policy reflects the State’s efforts to encourage investors to buy the ministry’s bonds with trust and confidence.

“We know that after the July accident, the ministry has faced many problems in dealing with financing. Many institutional investors are doubtful and worried about the ministry’s ability to repay, which has created challenges for the ministry to raise capital,” He said.

China normally levies a 25 percent tax on earnings on bonds. The new tax rate of 12.5 percent will apply to bonds issued by the ministry between 2011 and 2013, according to the preferential tax policy.

At the end of June, the MOR’s outstanding debt stood at 2.09 trillion yuan.