The Centre on Tuesday said that offshore funding for Indian Railways would be encouraged only for infrastructure development, not operations.

The clarification comes against the backdrop of the government considering foreign direct investment (FDI) in Railways, a move that had ruffled a few feathers.

As the Railways faces a severe resource crunch, hampering the implementation of pending projects, it plans to bring in FDI in select sectors, such as high-speed train systems, dedicated freight lines, for building coaches, tracks and stations, electrification and commercial development of vacant lands.

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

Union Railway Minister D V Sadananda Gowda, who held a discussion with Commerce Minister Nirmala Sitharaman recently, sought the Commerce Ministry’s help to get FDI.

“There is no question of allowing foreign companies in the operation part of the Railways,” Gowda told Deccan Herald here.

He said that the Railways needs Rs 5 lakh crore for modernisation and clearing of pending projects. A large chunk of that sum will come from the private sector, he added.
 
A section of railway employees had cautioned the government against considering FDI for Railways, and apprehended that the national carrier would move towards privatisation in the long run.

But they also fear that mass privatisation will result in loss of jobs for them.

Dismissing this fear, Gowda said since the government requires huge funds for modernisation that will lead to better services, the ministry is planning to allow FDI.

However, “there is no question of allowing FDI in the operation of Railways,” he added.  
Sources said the Railways is preparing a draft Cabinet note, which would be finalised after consultations with other ministries.