FDI in Indian Railways for development of modern railway systems

Indian Railways serve a major precinct of the Indian sub-continent by fulfilling the immense transportation requirements and plays a crucial role in India’s surge in the international market as a key player.

The Modi government has undertaken various steps towards achieving better Railway facilities and augmenting existing ones in terms of the ability with which Railways can efficiently manage the need of freight and passenger carriage, by means of implementing new policies and new regulations.

Progressive initiatives have served the combined purpose of revitalizing railway operations, opening gates of surplus opportunities and inviting foreign investments in a sector previously dominated by the government .

Foreign participation had not yet been very encouraged with the Government being very cautious about the Railways and its presence in the development initiatives of the country .

In a step towards spawning funds for the capital deprived Indian Railways, the Goverment of India’s Department of Industrial Policy and Promotion (DIPP) permitted 100% FDI in certain subsectors, for overseas investors seeking to participate under an automatic route.

Department of Industrial Policy and Promotion on Aug 22, 2014, via press-note, sanctioned the construction, exercise and maintenance at various intersections of Indian Railways by means of foreign interaction and participation.

The following niches have gained FDI post the DIPP directives:

  1.  Operational revamping and maintenance of Suburban Rail Networks and Rail based Mass-Rapid Transit systems (MRTS) systems in India by achieving active participation in compliance with Public Private Partnership (PPP) models
  2.  Realization, audit and development of various High Speed Rail projects in India.
  3.  Japan and India joined hands for the construction and operation of Mumbai – Ahmedabad Bullet Train corridor, by adopting Japan’s successful Shinkansen technology, which has also been successfully rendered in Taiwan. Trains under the project will run at a high speed of 320 km/h reducing travel time between the business-oriented urban locations to almost a quarter.
  4.  A multitude of other High Speed Rail projects are proposed across the country with a steered speed of 200 km/h. A large number of these projects will be realized on elevated corridors for avoiding vulnerable human and animal crossings.
  5.  Indian Railways had witnessed dramatic inversion in the freight transportation trends by allowing higher freight volumes despite of hushed improvements in the infrastructure, increased axle loads or reduced costs at a yearly average increment of 8 to 11%. The transporter is poised to avail a further increase with an average of 8 to 10% over the next 3 years.
  6.  Augmenting international trade has led to the conceptualization of Dedicated Freight Corridors subjoining ports and economic zones to industrial centres and viable markets. This will allow upto 55% increase in the revenue earned by Indian Railways from freight operations.
  7.  World Bank overseeing International Bank for Reconstruction and Development (IBRD) have furnished affordable loans for the conception and implementation of the project, also pursuing foreign investors to participate under various PPP schemes.
  8.  Various Metro projects across the country have sought manufacturing services for Rolling stock from international giants like Bombardier, CSR Nanjing, Hyundai Rotem etc. Overriding the concept, Indian railways, headed by Rail Minister Suresh Prabhu, invited foreign manufacturers to setup their manufacturing units in India in accordance with the Make in India program for attaining indigenous Coaches and Locomotives made with leading international technology.
  9.  Following the effort, General Electrical (GE) and Alstom, in the month of December, were awarded Letters of Acceptance (LoA) for Electric and Diesel Locomotive manufactories at Madehpura and Marhowrah in Bihar with a mandate to manufacture ecologically-friendly locomotives.
  10.  Taking up the Swiss Challenge in an attempt to remodel 400 railway stations to equip them with latest amenities and technological advancements was an important element of Modi Government’s declarations for the FY2015-16.

Permitting FDI in the railway sector was an essential step for furnishing the necessary advance required for the development and modernization of the capital intensive sector.

The Ministry of Railways has already started to ink potential projects and proposes to award railway projects worth billions of USDs with FDI opening up significant opportunities for the foreign investors to participate in the railway sector in India.