Government may allow up to 74% FDI in railway projects

The outgoing United Progressive Alliance (UPA) government is expected to allow foreign investment up to 74 per cent in railway construction and maintenance projects with the cabinet giving a go-ahead within the next two weeks, as per a report in Business Standard.

The railway ministry has approved the draft cabinet note prepared by the Department of Industrial Policy & Promotion (DIPP), under the commerce ministry. The original draft had proposed 100 per cent FDI, but this has been scale down to 74 per cent, the report added.

The Cabinet Committee on Economic Affairs (CCEA) is likely to give its nod to the proposal by early next month.

The liberalisation will not change the state monopoly over the operations of running passenger railway services, one of the most extensive networks in the world.

According to the BS report, the final note suggests up to 100 per cent FDI in dedicated freight corridors and high-speed railway networks under the fixed-line category; only up to 74 per cent should be allowed in collaborations and joint ventures in other areas.

The government had previously tried to pool in investments through public-private partnership (PPP) projects, but this did not find many takers. Once the FDI proposal is cleared, foreign investors can hold equity stake in special-purpose vehicles meant for such railway construction projects.

The proposal could be of interest to Chinese firms which have been looking at the opportunity after having made inroads in other markets in Africa for such infrastructure projects.

(Edited by Joby Puthuparampil Johnson)

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