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Friday, July 18, 2014

Finance ministry favours 49% FDI in Railways; Home Ministry says no to sensitive areas

Finance ministry favours 49% FDI in Railways; Home Ministry says no to sensitive areas 

NEW DELHI: The finance ministry has backed opening up the railways to overseas investment but with adequate safeguards to ensure foreigners are kept out of projects in sensitive areas. Consequently, Arun Jaitley's ministry has favoured allowing foreign investment up to 49 per cent through the automatic route and more than that on a project-specific basis after due approvals. The ministry of home affairs has already raised red flags on allowing FDI in railways in sensitive areas.

In case-by-case approvals, up to 100 per cent equity could be allowed, the finance ministry has suggested, as the intent is to attract as much overseas investment in the sector as possible. "The finance ministry has favoured a caliberated opening up in the beginning," a government official aware of the development told ET.

The department of industrial policy & promotion ( DIPP) has circulated the final proposal on foreign direct investment (FDI) in railways for the Union Cabinet's consideration aimed at roping in overseas investors to help modernise the country's creaking railway infrastructure.

Under the proposal, railway transport will be removed from the list of prohibited sectors in the consolidated FDI policy and foreign investment will be allowed in all publicprivate partnership projects and in infrastructure such as signaling, high-speed tracks, electrification, dedicated freight corridors and suburban networks.

Foreign investors are also sought to be allowed in operations in publicprivate partnership (PPP) projects for suburban corridors, high-speed train systems and dedicated freight lines.

Foreign investment is currently not allowed in the railway sector, except in mass rapid transport systems. The government hopes FDI will bring in the much-needed funds. The railway budget presented last week said Rs 5 lakh crore is needed over the next 10 years to complete existing projects.

A number of countries including Japan and China have shown interest in investing in the railways. It won't be easy for India to shut out investors from any country if the doors are opened completely, as that would be seen as discriminatory. "The question is, are you ready to allow a foreign investor to build railway networks in the North-east, particularly Arunachal Pradesh or Jammu & Kashmir... Even if you do, should you not keep the door handle in your hand," another government official said

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