Indian Railways to look at long-term FDI flow

New Delhi:  Railway Board is trying to formulate policy for foreign investment, plans to seek the federal cabinet’s nod soon to allow full or partial foreign ownership in companies that build and maintain railway lines connecting industrial hubs and ports with the country’s sprawling rail network, an official from the Finance Directorate of Railway Board told, who declined to be named as the recommendation has not been made public.

“This will help attract foreign investment and develop much-needed infrastructure for industries to transport goods,” the official said, adding that the recommendation could be submitted to the cabinet in as soon as two weeks.

Indian industry growth has been slowed due to the country’s overburdened and outdated networks of roads, ports, power plants and railways. More international involvement in railways could help provide some of the reliable transport facilities companies need to boost industries, the official said.

If the country decides to open the sector to foreign investment, authorities will have to remove railway transport from the list of prohibited sectors for foreign direct investment.

“The Department of Industrial Policy and Promotion is in favour of allowing up to 100 percent foreign ownership in special purpose vehicles for first and last mile connectivity between ports, mines and the existing railways freight stations,” the official said.

India’s state-owned rail network is the main mode of long-distance travel in the country, carrying 23 million people every day. It’s also the key mode for transportation of goods such as coal, iron ore, fertilizer, cement and grains. Indian railways carry an average of two million tons of freight every day.

The railways transported 343 million metric tonnes of freight between April and July this year, registering a 4.89 percent growth in shipments from the same period last year.

Despite an increase in goods transportation, Indian Railways is expected to incur a loss of nearly US$3.95 billion in the year ending next March because of cheaper fares for public transport, according to an official at the Railways Ministry.

The Indian government has been seeking foreign investment in infrastructure to bridge the yawning fiscal deficit, estimated at 4.8 percent of the gross domestic product in the fiscal year through March.

Prime Minister Manmohan Singh’s government last September threw open sectors such as supermarkets, aviation and telecom to more foreign investment. However the government’s policy liberalisation has so far failed to bring much in terms of fresh investment.