Cabinet note on FDI in Railways likely by next month

Cabinet note on FDI in Railways likely by next month

New Delhi:  Aiming to bring more foreign direct investment ( FDI) in the country, Department of industrial policy & promotion (DIPP) is likely to circulate Cabinet note by the next month proposing liberalised rules for FDI in railways, defence and construction.

“The consultations are at final stage final stage. We are hoping to get final comments by the starting of next month and soon after that we will put proposal in front of the Cabinet,” sources close to the development told The Pioneer.

Even DIPP Secreatry Amitabh Kant had recently said that “The CCEA has approved the 49 per cent FDI in insurance and the Cabinet notes for Railways, defence are under the final consultative process. Once we get the final comments, we will put them up to the Cabinet for approval shortly.”The Government proposes to hike the FDI ceiling in the sensitive defence sector to 49 per cent from 26 per cent, ensuring control in Indian hands, for boosting domestic industry of a country which imports up to 70 per cent of its military hardware.

Besides, it also plans to ease FDI norms for the cash-starved Railways. The Department of Industrial Policy and Promotion (DIPP) has proposed permitting 100 per cent FDI in areas such as high-speed train systems, suburban corridors and dedicated freight line projects implemented under PPP mode.

The FDI liberalisation in the sector would help in modernisation and expansion of the Railways. According to estimates, the sector is facing a cash- crunch of around Rs 26,000 crore. However, FDI is not proposed to be allowed in train operations and safety.At present, there is a complete restriction on any kind of FDI in the Railways sector except mass rapid transport systems. The move will also help in development of its infrastructure for industrial purposes.

China and Japan have shown interest in investing in the railways. While railway FDI proposals won’t have to go to the Foreign Investment Promotion Board because they’ve been recommended for the automatic route, approvals may have to be taken from the Ministry of Railways.The Ministry of Railways has selected seven corridors for prefeasibility studies for the introduction of high-speed passenger trains. Such projects are highly capital intensive in nature and require large passenger volumes and high tariffs, given the sizeable levels of investment.

In November last year, the proposal of the DIPP to relax FDI norms in the sector was discussed at the Cabinet meeting but was deferred due to concerns being raised by the Urban Development Ministry on few norms. The DIPP has proposed easy conditions for exit for developers before the three-year lock-in period and a change in the current requirement of having a minimum built-up area for FDI in construction development projects.

Source : RailNews.