Rail Budget 2014: Ministry to seek Cabinet nod for FDI policy relaxation

New Delhi: Looking to attract funds for infrastructure development, the Railways Ministry would seek approval of the Union Cabinet to relax foreign direct investment policy to overcome cash crunch. While presenting the Railway Budget for 2014-15, Railways Minister Sadananda Gowda on July 8 said the government would mobilise resources to fund different infrastructure projects.

"Growth of railway sector depends heavily on availability of funds for investment in rail infrastructure. Internal revenue sources and government funding are insufficient to meet the requirement. Hence, the Ministry of Railways is seeking Cabinet approval to allow FDI in Rail Sector," the Minister said.

However, he clarified that FDI would not be permitted in rail operations. The Commerce and Industry Ministry has circulated a draft cabinet note for inter-ministerial consultations. It has proposed to permit FDI in high-speed train systems, sub-urban corridors and freight lines connecting ports, mines and power installations.

To leverage railway PSU resources, the Ministry proposed to launch a scheme to bring in investible surplus funds of the public sector units in infrastructure projects of railways, which can generate attractive returns for PSUs. Noting that railways being a capital intensive sector have not been successful in raising substantial resource through PPP route, Gowda said that bulk of future projects would be financed through this mode, including the high-speed rail which requires huge investments.

"Railways will interact with industry and take further steps to attract investment under PPP through BOT and Annuity route and 8 to 10 capacity augmentation projects on congested routes will be identified for this purpose," he said. Zonal railways will be suitably empowered to finalise and execute such projects, he added. The Minister said with a large backlog of sanctioned projects, funding continues to be the biggest challenge for railways.

He said while private investment and customer funding for some port connectivity projects and few other power sector projects has started, much more needs to happen if infrastructure creation has to keep pace with the requirement. Railways has taken up port connectivity on priority through PPP mode of funding in tandem with Sagar Mala Project of Port Development.

"Railways will facilitate connectivity to the new and upcoming ports through private participation," he said, adding so far in-principle approval has been granted for building rail connectivity to the Ports of Jaigarh, Dighi, Rewas, Hazira, Tuna, Dholera and Astranga under Participative Model Policy of Indian Railways, amounting to a total cost of over Rs 4,000 crore.