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 the railways.
Press Note 8 of 2014 amended the Consolidated FDI Policy Circular, 2014
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
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