India to push private investment in railway network

NEW DELHI (Reuters) - The bulk of India's future railway projects will be financed through public-private partnerships, the country's railways minister said on Tuesday, in a bid to modernise the vast but underfunded network.

In his maiden budget, Sadananda Gowda said his ministry would also seek cabinet approval for allowing foreign direct investment in the state-owned network, but passenger services would be excluded.

"The bulk of our future projects will be... by the PPP model," he told India's parliament, referring to public-private partnerships.

India's railway, the world's fourth-largest, has suffered from years of low investment and populist policies to subsidise fares. This has turned a once-mighty system into a slow and congested network that crimps economic growth.

The decision to push private investment signals the appetite Prime Minister Narendra Modi's new government has for taking tough and unpopular decisions he has said are needed to revive the economy.

Reform of the railways has long proven politically sensitive. Successive governments have backed away from modernization, preferring instead to use the system to provide cheap transport for voters, and jobs for 1.3 million people.

(Reporting by Frank Jack Daniel; Writing by Tommy Wilkes; Editing by Douglas Busvine and Richard Borsuk)