In a major policy initiative, the Government of India has permitted 100 per cent FDI through the ‘automatic’ route in nearly all segments of railway infrastructure. Till now, FDI was allowed only in mass rapid transport systems and not in railway transport.
The government, in a notification dated August 22, 2014, reviewed its policy for private investment in rail infrastructure through both domestic and foreign direct investment and decided to permit FDI in the construction, operation and maintenance in following areas of the railway sector — suburban corridor projects through PPP; high-speed trains; dedicated freight lines; rolling stock including train sets and locomotives and coaches and their manufacturing and maintenance facilities; railway electrification; signalling systems; freight and passenger terminals; infrastructure in industrial parks pertaining to railway lines and sidings including electrified railway lines and connectivity to main railway lines; and mass rapid transport systems.
However, FDI proposals beyond 49 per cent in projects in sensitive and security-risk areas, from the security point of view, will have to be placed before the Cabinet Committee on Security for approval.
Also, atomic energy and railway operations other than those mentioned above are not open to the private sector.
The new development assumes significance in light of the Modi government’s promise to take reforms forward, as mentioned in this year’s railway budget, as well as the Comptroller and Auditor General of India’s observations on PPP projects in railways.
In its 2014 report on the Railways, the CAG recommended the framing of a Model Concession Agreement for PPP projects in Indian Railways, adoption of Expressions of Interest for selection of all equity partners other than principal stakeholders, accuracy of data and assumptions, streamlining of approval process, timelines for achieving financial closure, and strengthening the monitoring mechanism of PPP projects.