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Despite Home Ministry already having red flagged FDI, Sadananda Gowda proposes opening railways sector for foreign investments

Tuesday, 8 July 2014 - 12:33pm IST | Place: Mumbai | Agency: dna webdesk

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Railways minister Sadananda Gowda who is presenting the railway budget at the parliament spoke about rail fare hikes and using Foreign Direct Investment (FDI) to bring railways out of debt. 

He said, "Need to explore alternative sources of resource mobilisation and not depend on fare hike alone." 

This move is completely opposite to BJP's stand of opposing FDI in India which has made the country an unfavourable destination as foreign investors shun the country for business prospects. 

Gowda said that plans were on to attract investment from domestic and foreign players in infrastructure and the focus was mainly on aggressive indigenisation. 

Gowda said that the expenditure in 2014-15 for railways was pegged at Rs 149,176 crore.

He also added, "Surplus revenues declining, hardly any resources for development works. Rs 5 lakh crore required for ongoing projects only." 

But, the Home Ministry had raised objections in allowing foreign direct investment in highly- sensitive areas of the Railways sector, saying such a move may compromise security of the country's largest transportation network. 

The objection came after the Commerce and Industry Ministry had circulated a draft cabinet note for inter-ministerial consultations proposing 100% FDI in areas such as high-speed train systems and dedicated freight lines. "There should not be FDI in highly sensitive parts of the railways," a Home Ministry official told PTI. 

Managing passenger and freight traffic and operations of trains are considered to be the most sensitive parts of the Indian Railways. The proposal was mooted by the Department of Industrial Policy and Promotion (DIPP) under the Commerce and Industry Ministry. The department believes that permitting foreign investment in the cash-starved Railways would help in growth of the sector.

Railway is a critical sector for driving India's economic growth and it has the potential to raise GDP by over 1%. 

Besides high-speed train systems and dedicated freight lines, there is also a proposal to allow foreign investment in sub-urban corridors and freight lines connecting ports, mines and power installations.

According to sources, an urgent need was felt to modernise, strengthen and expand the Indian railway network which would require very large capital investments.

At present, there is a complete ban on any kind of FDI in the Railways sector except mass rapid transport systems.

In its election manifesto, the BJP has committed to modernise and upgrade the Railways and launch Diamond Quadrilateral project of high-speed train network. The UPA government had also tried to relax FDI norms in Railways but could not push the proposal because of the general elections. 

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