FDI Policy for Railways likely to be delayed

New Delhi:  The Government’s plan to permit Foreign Direct Investment (FDI) in the Indian Railways may be delayed. The Union Ministry of Commerce & Industry has asked the Railway Ministry for greater clarity on the scope of the policy and the preferred route for bringing in the foreign investment.

“The Railway Ministry’s response to the draft Cabinet note is confusing and leaves a lot of room for interpretation regarding the route through which it wants the investments to come (in from) and the areas that it wants to open up,” an official in the Department of Industrial Policy & Promotion (DIPP) told.

SPV route

DIPP, which formulates foreign investment policies, had circulated a draft Cabinet note in September proposing 100 per cent FDI in the Railways, but the Railway Ministry had sought several changes.

According to the DIPP’s proposal, foreign investors would be allowed to hold 100 per cent stake in special purpose vehicles (SPVs) meant for construction of port connectivity projects and railway lines connecting mines and industrial zones to the existing rail network.

The Railway Ministry, however, wants to go beyond FDI in connectivity projects, to areas where it has PPP (public-private partnerships). Private investors have so far largely ignored the PPP projects. The Railways hopes to attract Rs 6,000 crore through the PPP route this year. The Railway Ministry had approached the DIPP in May urging it to permit FDI into the sector. But it had clarified that the investment was being sought only in construction and maintenance of projects, and not for running its operations.

The DIPP official said the Railways Ministry had to be more precise in pointing out the exact areas where FDI was needed. It also has to make clear whether it wanted investments through the automatic route or bring it in through the Foreign Investment Promotion Board (FIPB).

While the FDI policy at the moment does not incorporate railway transport, the Indian Railways has a policy that invites private investment, both Indian and foreign, in rail connectivity projects with prior approval from the FIPB.