FDI in high speed trains expected soon

The Government is expected to permit Foreign Direct Investment (FDI) in high speed trains and other projects including development of rail lines between project sites and existing network. The Department of Industrial Policy and Promotion (DIPP) has proposed 100% FDI through automatic route along with the proposal to de-license and de-reserve few areas of the cash-deficient railway sector. However, FDI will not be permitted in train operations and safety. At present, (FDI) in the railways sector is completely forbidden except mass rapid transport systems.

What are the key points in the proposal for allowing FDI in Indian Railways?

As per the proposal, government should:

• Allow 100% FDI through automatic route
• De-license and de-reserve few areas
• Allow FDI in railways sub-urban corridor, high speed train systems and dedicated freight line projects implemented in PPP mode.
• Expand the definition of ‘infrastructure’ by including railway line and railway sidings.
• Allow foreign companies to control 100% stake in the Special Purpose Vehicle (SPV) that will build and maintain rail lines linking ports, mines and industrial centers with the existing rail network.

Why do we need FDI in Railways?

Indian Railways are facing a cash problem. This requirement of cash can be met to a great extent by allowing FDI in the sector.  When foreign firms would be allowed to control SPVs that will construct rail lines linking ports, mines and industrial centers with the existing rail network it would facilitate smooth movement of raw materials from mines to ports. Industrial development and exports have been suffering due to poor infrastructure which hinders output and increases the cost of production. Railways can play a significant role in providing a reliable transport facility needed for industrial growth.

Month: Current Affairs - January, 2014