JOIN USThe Union cabinet’s decision to allow up to 100 per cent foreign direct investment (FDI) in the railways is a welcome move to get the behemoth out of the mess it finds itself in.
In a severe cash crunch, the mega organisation that carries a mammoth 23 million passengers a day, but spends 94 paise of every rupee earned, has been clearly gasping for breath. That only 30 per cent of its investment comes through its internal revenues and the rest from the government and loans, shows why the vast network of railways is crying for funds.
The NDA government’s move, will now open up the railways in its various sectors such as suburban corridor projects, high-speed train projects, dedicated freight lines, locomotive and coach manufacturing and maintenance, electrification, signalling systems, freight terminals, passenger terminals, infrastructure and industrial parks pertaining to railway lines, and mass rapid transport systems.
The cabinet has also allowed 100 per cent FDI through the Special Purpose Vehicle route to provide last mile connectivity to ports and mines. It has been for years that world’s leading engine and coach manufacturers were wanting to get a pie in the Indian railway systems but a rigid government policy made them stay away resulting in the country being deprived of the much required investment inflow and technological know-how.
Although FDI was hitherto not been allowed, it is not that the railways did not welcome private sector investment earlier. However, private sector participation in railway projects had been negligible, save for the Pipavav Railway Corporation Limited, a PPP project between Indian Railways and the Gujarat Pipavav Port Limited set up to construct, maintain and operate 271 km line connecting Port of Pipavav to Surendranagar in Gujarat.
According to one estimate, the government’s move to inject FDI in railways may bring in about $10 billion of foreign investment over the next five years. This may also mean the FDI may contribute an additional 2 per cent to the GDP.
However, it is inexplicable that the government has not allowed FDI in railway operations citing security reasons, as railway minister D V Sadananda Gowda informed Parliament. If allowing the private sector in not just operations but the entire railway systems in developed countries without any security issues is possible, what stops India from doing the same? There is no reason why the government should deny to the people better facilities flagging the security scarecrow all the time.