DIPP proposes 100% FDI in cash-starved Indian Railways

New Delhi: The government is likely to allow Foreign Direct Investment in high speed trains and other projects including development of rail lines between project sites and existing network.

‘The Commerce and Industry Ministry has sent the cabinet note on the matter and a decision is likely to be taken this month only’, a government official told PTI.

Besides, proposing 100% FDI through automatic route in the cash-starved railway sector, the Department of Industrial Policy and Promotion (DIPP) has also proposed to de-license and de-reserve few areas of the sector.

However, FDI will not be allowed in train operations and safety.

At present, there is a complete ban on any kind of foreign direct investment (FDI) in the railways sector except mass rapid transport systems.

According to the proposal, foreign investment would also be allowed in ‘sub-urban corridor, high speed train systems and dedicated freight line projects implemented in PPP mode’, the official said.

It has also suggested widening the definition of ‘infrastructure’ by including railway line and railway sidings.

As per the proposal, foreign companies would be allowed to pick up 100% stake in the special purpose vehicle (SPV) that will construct and maintain rail lines connecting ports, mines and industrial hubs with the existing rail network.

‘It will be first-to-last mile connectivity between ports and things like coal mines to the existing railway freight stations’, the official said.

First-to-last mile connectivity would mean smooth movement of raw materials from mines to ports.

The move will help in attracting more and more FDI besides development of infrastructure for industrial purposes. Indian Railways are facing a cash problem.

Industrial development and exports have been suffering on account of poor infrastructure, which hampers output and raises the cost of production.

It is felt that railways can play a role in providing a reliable transport facility necessary for promoting industrial growth.

Players setting up sea ports and large mines need efficient railway connectivity.

Welcoming the development, experts said the government should come out with clear rules for public-Private- Partnership (PPP) projects.

‘A clarity is required on scope and terms of PPP projects’, Head of Tax department in corporate law firm Amarchand & Mangaldas, Krishan Malhotra said.