100% FDI gets green light for rly line projects

Dec 26 2012, 02:53 IST
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SummaryForeign direct investment is set to flow into the building of “fixed railway infrastructure”, ending a long-preserved policy of allowing only Indian Railways to set up these facilities out of its internal accruals or budgetary and other support.

Foreign direct investment is set to flow into the building of “fixed railway infrastructure” (read railway lines), ending a long-preserved policy of allowing only Indian Railways to set up these facilities out of its internal accruals or budgetary and other support.

Private investors, ports, export/import companies, “other investors” and FDI will now be allowed in the railway lines meant to connect ports, industrial and logistical parks, and mines with other parts of the country. The railways will either award these projects (construction and maintenance) on nomination basis or select the investor through competitive bidding. A revenue-sharing model has already been worked out.

The move is expected to give a boost to a sector where infrastructure expansion will provide direct, tangible benefits to the economy. Currently, the PPP model in the railway sector is at a takeoff stage, with large domestic investments coming in a few areas or projects, including the Mumbai elevated rail corridor, private freight terminals and a slice of the eastern segment of the dedicated freight corridor. However, no FDI is allowed in these PPP projects and is limited to only manufacture of components.

Under a new policy for participative models in rail connectivity and capacity augmentation projects notified by the railway ministry, 100% FDI has been permitted under the approval (FIPB) route “for the development of first- and last-mile connectivity projects at either end of the rail transportation chain providing connectivity to ports, large mines, logistics parks”.

Under the policy, the railways will soon invite expression of interest from prospective investors.

“It is applicable to any kind of goods traffic. These railway lines will be operated on the ‘common carrier’ principle for public transportation of goods. The railway connectivity will be developed on private land and it will be a non-government railway project,” according to the policy.

Besides, funds for the project will be fully mobilised by the project proponent without any participation by the railways. "The policy envisages financial participation of the project proponent in the development and creation of rail infrastructure for providing first- or last-mile connectivity under an agreement with the ministry either on its own or as a joint venture with the infrastructure financing and development institutions," said a railway ministry official.

Despite acute shortage of funds, railways have refrained from allowing FDI in their core areas and allow it, through the automatic route, only in the manufacture of components by private companies. Between 2000 and 2012, total FDI into

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