Monday, 29 September 2014

Private Investment in Rail Infrastructure

From the times where no investment (domestic or foreign) was allowed in rail transport sector during the Industries (Development and Regulation) Act, 1951 era, to one where Indian railways have now been opened up to private sectors including foreign investment up to 100% under the automatic route marks an important reform in the legal regime to be worthy of attention. The Department of Industrial Policy & Promotion, Government of India (“DIPP”) vide notification no. S.O. 2113 (E), dated 22nd August, 2014 (“Notification”) has reviewed its policy for private investment in rail infrastructure and amended the list of industries reserved for the public sector under item no. 8 of Schedule I of the principal notification no. S.O. 477 (E) dated 25th July, 1991. Accordingly, the said Notification provides for the permitted scope of business for private sector as follows:

Construction, operation and maintenance of the following:

  1. Suburban corridor projects through PPP,
  2. High speed train projects,
  3. Dedicated freight lines,
  4. Rolling stock including train sets, and locomotives/ coaches manufacturing and maintenance facilities,
  5. Railway Electrification,
  6. Signaling systems,
  7. Freight terminals,
  8. Passenger terminals,
  9. Infrastructure in industrial park pertaining to railway line/sidings including electrified railway lines and connectivities to main railway line and
  10. Mass Rapid Transport Systems.

Accordingly, it has been decided to permit FDI in the aforementioned activities of the railway transport sector and the amendments are made in the “Consolidated FDI Policy Circular of 2014” (“the FDI Policy”) vide Press Note no. 8 (2014 Series) dated 27th August, 2014. The Press Note has also widened the definition of the terms ‘infrastructure’ and ‘common facilities’ in the FDI Policy to include railway line or sidings including electrified tracks and connectivity to main railway line.

However, FDI in the said activities is subject to sectoral guidelines imposed by the Ministry of Railways. Moreover, in case of proposals involving foreign direct investment of more than 49% in sensitive areas from a security point of view will be taken up by the Cabinet Committee on Security (CCS) for consideration on case to case basis.

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