Government may soon permit FDI in railways: report

The government is likely to allow foreign direct investment (FDI) in the cash-starved railways sector, particularly for development of rail lines between project sites and existing network, according to a top government official.

At present, there is a complete ban on any kind of FDI in the sector. To allow FDI in the sector, the government needs to remove it from the list of prohibited sectors under the current policy.

As per the proposal of the Department of Industrial Policy and Promotion (DIPP), foreign companies would be allowed to pick up a 100 per cent stake in the special purpose vehicle (SPV) that will construct and maintain rail lines connecting ports, mines and industrial hubs with the existing rail network.

"It will be first-to-last mile connectivity between ports and things like coal mines to the existing railway freight stations," the government official told PTI.

First-to-last mile connectivity would mean smooth movement of raw materials from mines to ports.

The DIPP, which deals with FDI-related matters, has completed consultations with the concerned ministries on the proposal.

"The DIPP will soon seek Cabinet nod for the proposal. They have proposed to permit 100 per cent FDI under automatic route in such projects," the official said.

"The move will help in attracting more and more FDI besides helping in the development of infrastructure for industrial purposes. Indian Railways are facing a cash problem."    

Industrial development and exports have been suffering on account of poor infrastructure which hampers output and raises the cost of production. Railways can play a role in providing a reliable transport facility necessary for promoting industrial growth.

Players setting up sea ports and large mines need efficient railway connectivity. The Railway Ministry's efforts towards attracting funds through public-private partnership for infrastructure projects have failed to gather steam.

Meanwhile, losses incurred by the railways sector in its passenger segment are likely to touch Rs 25,000 crore this year, said Kotla Jayasurya Prakasha Reddy, Minister of State for Railways, in a written response to the Rajya Sabha.