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Government has imposed certain restrictions on FDI in railways for projects in "sensitive areas" by stipulating that proposals seeking overseas investments beyond 49% will be cleared by the Cabinet Committee on Security.
Earlier this month, the Union Cabinet had cleared the long-delayed proposal for relaxing foreign direct investment (FDI) policy in the cash-starved Indian Railways.
Sources said that the home ministry had raised concerns with regard to rail infrastructure in border areas.
To deal with all the security related issues in "sensitive areas" such as border and tribal areas, FDI proposals beyond 49% will be cleared by the cabinet committee on security (CCS), they said.
In all other areas such as high-speed train systems, suburban corridors and dedicated freight line projects, 100 per cent FDI is permitted through automatic route.
The foreign investment liberalisation in the sector is aimed at helping in modernisation and expansion of the rail projects.
However, FDI will not be allowed in train operations and safety.
According to estimates, the sector is facing a cash crunch of around Rs 29,000 crore and allowing of FDI will help mop up resources.
With the FDI nod, the proposed Mumbai-Ahmedabad high speed rail corridor is expected to get a push. The construction of exclusive rail corridor for freight movement is also likely to get a boost.