Brief highlights of the opening up of the Indian railway
infrastructure sector for foreign direct investments.
The year 2014 was a year of many changes. Starting from the new
Government with an absolute mandate (for the first time in the last
three decades), to allowing foreign direct investment (FDI) in the
railway sector (for the first time in the last 200 plus years of
Indian rail history).
FDI has always been prohibited in the Indian railway sector,
which has traditionally been a state owned and operated
infrastructure facility. However, the position changed recently
when the Government decided to open up the crucial sector, which
happens to be India‟s largest commercial establishment, for
private investments and FDI. The Department of Industrial Policy
and Promotion (DIPP) vide its Press Note No. 8 of 2014 dated August
27, 2014 has introduced and permitted FDI in certain sub-sectors of
Press Note 8 of 2014 amended the Consolidated FDI Policy
which has been in effect since April 17, 2014, provisioning
therein for FDI in the railway sector.
The Indian Railways, India‟s largest commercial
establishment, has always been a Government monopoly with
minimalistic private participation. Although for many years now the
idea was being mulled to allow grater private participation and
foreign investments in the railway sector for giving the necessary
funding boost to the sector which is the need of the day for the
cash strapped railway sector, it is in 2014 that the opening up of
the sector for private and foreign participation finally saw the
light of the day.
Although with the many necessary restrictions, FDI was finally
allowed in several spheres of the railway industry and the revised
FDI policy allows FDI in the construction, operation and
maintenance of only the following:
(a) Suburban corridor projects through PPP model: FDI has now
been allowed in the construction, operation and maintenance of
suburban rail corridors. The revised FDI policy has opened up
suburban corridor projects for FDI. Suburban corridor projects are
the intra-city railway corridors providing transportation between
the suburbs and the city.
(b) High speed train project: FDI has now been allowed in the
construction, operation and maintenance of high speed rail
corridors. Currently there are no high speed train corridors in
India. However, two high speed rail projects have been proposed,
which are in a nascent stage. High Speed Rail Corporation of India
Limited has also been formed on the directions of the
Ministry of Railways, for the development and implementation of
high speed rail projects in India.
(c) Infrastructure in industrial park: FDI has now been allowed
in the construction, operation and maintenance of industrial park
infrastructures. The revised FDI policy has also revised the
definitions of infrastructure and common facilities in relation to
industrial parks to include railway line/ sidings including
electrified railway lines and connectivity to the main railway
line. Railway sidings are low speed tracks which connect the main
tracks. They are used for lower speed or less heavy traffic.
(d) Freight lines, rolling stock including train sets,
locomotives/coaches, railway electrification, signaling systems,
freight terminals, passenger terminals: Freight lines are the
specialized lines only for the movement of freight in order to
reduce the burden on passenger lines. Rolling stock are the
locomotives, cars, coaches and wagons.
(e) Mass rapid transport system ("MRTS"): MRTS are
means of transport for quick travel within the city for a large
number of people. The Urban MRTS includes metro projects in cities
such as Mumbai, Bangalore and Delhi.
FDI in the railway sector aims to generate much-needed funding
to the cash strapped Indian Railways, and enable it to introduce a
high-speed train system, build and upgrade suburban corridors, and
most importantly; augment freight logistic capacity through the
speedy development of dedicated freight corridors
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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