Under a single management, Indian railway network has been recognised as one of the largest systems in the world. The Indian Government is now focused towards making the network an investment-friendly sector through policy reforms. Recently, it has enabled foreign direct investment (FDI) in the sector for improving infrastructure for high-speed trains and freight trains. In the current scenario, the private sector is also looking at investing in rail projects.
Although, no freight or passenger trains services are being handled or operated by private sector, container services are being offered by licensed private players, which are being provided on a pan-India basis.
Some of the recent initiatives undertaken by the Government to encourage private-participation in the sector are as follows:
FDI in Railways:
The proposal has been cleared by Government for allowing 100 per cent FDI in railway infrastructure, apart from operations, through automatic route. Investments or FDI that is being routed through this mode would not require prior approvals from the Government. Inflows of FDI – in railway related components – since April 2000 to February 2015 had been around USD 634.27 million.
In the month of November 2014, as per the sectoral guidelines for Domestic or Foreign Direct Investment, private participation has been permissible in the suburban corridor projects. This can be done through Public Private Partnership (PPP) for freight lines that are dedicated, high-speed train projects, manufacturing of rolling stock as well maintenance facilities, signalling system, electrification of railway, parks related to freight terminals or logistics, institutes for railway technical training, passenger terminals, testing facilities, energy from non-conventional sources, laundry mechanization, bio toilets, improving safety and level crossings – technological solutions[i].
Foreign investment in Railway services:
Suresh Prabhu – Railway Minister – has invited other countries to make India as their base for manufacturing. The Government wants to invest USD 120 billion in the next five years for developing railway services. As India has an advantage in terms of skilled manpower, as well as large base for manufacturing and consumption base, it would be a lucrative sector for the foreign investors, the minister opined. In fact, investment through public-private partnerships has witnessed a surge to INR 5,781 crore or USD 916.04 million.
Global companies in Railways manufacturing:
Bombardier, TALGO, Hyundai-ROTEM, as well as CAF- have queued in the country already for manufacturing semi high-speed train, which would be used as faster travelling mode between cities. This was announced by the railway minister in the rail budget this year. The approximate cost of these projects would be around INR 2,500 crore for around 15 train sets. In case, these succeed in Indian market, more sets would be ordered for consumption. These train sets are mostly identical to that of bullet trains, wherein the blocks are self-propelled and are not pulled by locomotive[ii].
No plan of privatisation of Railways:
There has not been any plans to privatise Railways as yet, although, private participation in terms of strengthening and building rail infrastructure might be made permissible. With this, private participation for building rail infrastructure might be one of the focus areas for the ministry this year. Although, no plans have been made for mobilising private funds for Railways[iii].
The sector is also in the process of bidding out two locomotive factories in Bihar. Companies such as Siemens, Alstom, Bombardier and GE – were shortlisted for the proposed Madhepura electric locomotive factory, while EMD and GE, are now looking at diesel locomotive plant which is in Marhorah.
Ever since NDA-Government, led by Narendra Modi, has taken the center stage, they have been aggressively looking at private investment into the sector. With this, Government has cleared 100 per cent FDI in railways infrastructure. It is an opportunate time for foreign companies to invest in Railways in India.
To know more about the latest Government policies in Railways, connect with our consultants at enquiries@tecnovaglobal.com.
