Green signal for FDI in railway infrastructure

FDI is now allowed in all areas of Railways, except operations

Ahead of Prime Minister Narendra Modi’s visit to the US, the Cabinet has cleared a proposal to allow 100 per cent foreign direct investment (FDI) in Indian Railways. Two American companies — GE and EMD — have been shortlisted for a proposed diesel locomotive factory to be built in Bihar.
Now, except for Indian Railways’ operations, FDI can be brought into all special purpose vehicles, companies and joint ventures as an equity infusion, explained sources.
The existing Department of Industrial Policy & Promotion (DIPP) rules do not permit FDI in the railways.
Railway Minister Sadananda Gowda is likely to introduce a Bill in Parliament to amend the Railways Act, on Thursday.
With this policy change, FDI can be brought into high-speed train systems, freight terminals, building of rail links, electrification and signalling systems. A notification will have to be issued for the exact terms and conditions.
The policy change will also permit investments in manufacturing, construction and maintenance, spread over 20-30 years. There are already private investments in rail-based industries such as metro coaches, wagons and wheel manufacturing units.
FDI will also be allowed in suburban corridors and dedicated freight lines that are to be executed under the public-private partnership mode.
Strategic clearance
The Home Ministry had expressed concern that there might be security-related issues for projects in strategic border areas. For such projects, prior permission of the Foreign Investment Promotion Board and clearance from the Home Ministry may be required, an official said.
The Home Ministry has assured the DIPP that it will take a decision on strategic clearance for specific FDI proposals within three months.
Though India is looking at attracting equity investments through the FDI route, Japan, which is interested in providing technology support for bullet trains, has said that it may not opt for the equity funding route.

Based on businessline
GA Team
Mahendra Educational PVT LTD