The government is examining proposals to boost foreign investment in railways and defence with final touches being given to ground rules that would enable this.
While a plan is underway to allow foreign direct investment (FDI) in high-speed trains and rail cargo passageways even for those operated through the public-private-partnership (PPP) route, the Centre has also floated a consultation paper to raise FDI in defence from the current 26%, sources with the direct knowledge of the matter said.
FDI in railways would pave the way for overseas investors to pick up equity in projects such as the Delhi-Mumbai dedicated rail freight corridor.
“The Rakesh Mohan committee on modernisation of railways had spelt out the segments where FDI should be allowed. Those inputs have been expanded in the proposal,” the government source said.
The Department of Industrial Policy and Promotion has moved the proposal to include freight corridors and high-speed train systems within the broad category of “railway operations”, where FDI up to 100% will be allowed in most areas.
The Cabinet is expected to take a decision on this shortly.
“There is an urgent need to modernise, strengthen and expand the Indian railway network, which would require large amount of capital investments,” the government source said. “This makes private participation imperative in the construction of fixed rail infrastructure”
However, FDI will not be allowed in train operations and safety. Sources said the ministry of railways will set up a core group with requisite technical and security expertise to evaluate proposals of projects “with a critical view to ensure that private and foreign investments are not detrimental to overall national security.”
The defence paper contains all the possible areas where FDI can be allowed in the sector. The government is evaluating various models adopted globally when they opened up defence for FDI, the source said.