Govt notifies FDI relaxation for Indian Railways

FDI was so far allowed only in Mass Rapid Transit systems of railways

The commerce ministry today notified new relaxed norms for Foreign Direct Investment (FDI) in Indian Railways in order to modernize and expand the railway infrastructure by raising additional resources for the cash-strapped transporter.

"The government has on 22 August 2014reviewed its policy for private investment in rail infrastructure and amended the list of industries reserved for public sector," a notification issued by the Department of Industrial Policy and Promotion (DIPP) under the ministry read.

FDI was so far allowed only in Mass Rapid Transit (MRT) systems of railways. It will now be permitted in construction, operation and maintenance of suburban corridor projects based on Public PrivatePartnership (PPP), High Speed Trains, Dedicated Freight lines, rolling stockand coach manufacturing facilities, electrification and signaling.

Other key areas that will now be openfor FDI include freight terminals, passenger terminals and infrastructure inindustrial parks relating to railway sidings in addition to MRT systems. However, FDI beyond 49% in sensitive areas will be brought for Union cabinet'sapproval on a case-to-case basis.

Through the notification, the government also widened the definitions of "infrastructure" and "common facilities" in theConsolidated FDI Policy Circular of February 2014 to include railway line or sidings including electrified tracks and connectivity to main railway line.

Despite multiple announcements of PPP projects Railway budgets, actual private investment under PPP since the year 2000 has been around Rs 3,000 crore. Of this, less than 10% has come from non-government companies, according to a recent reportby Comptroller and Auditor General of India.