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Coming soon! FDI in Railways to boost high speed train networks
NEW DELHI: The government will soon invite foreign businesses to help expand its once-mighty but now outdated railways, sources said, in a move that would mark the opening up of one of the country's last great state-controlled industries.
Foreign investors will be allowed to fully own new services in suburban areas, high speed tracks, and connections to ports, mines and power installations, said two senior officials involved in the deliberations.
Existing passenger and freight network operations will not be open to foreign investors under the initiative, which seeks to ease bottlenecks that slow travel on the world's fourth-largest rail system.
"The plan is to allow 100 per cent foreign direct investment in suburban corridors, high-speed train systems, freight line projects implemented through public-private partnership," said an official at the Department of Industrial Policy & Promotion.
The government officials said the move could attract up to $10 billion of foreign investment over the next five years.
Previous targets to attract private investment to build India's infrastructure have been missed by a wide margin, but there were positive initial responses from potential investors such as General Electric Co and Bombardier .
Established under British colonial rule, India's vast train network has been overtaken by China's rapid rail expansion over the past two decades.
Train travel is very cheap, and some 25 million passengers use this mode of transport daily. But years of under investment mean the service is slow and plagued by frequent accidents, most recently a fire that killed nine people this week.
Freight charges are pegged far higher to subsidise the passenger services, driving much cargo transport onto clogged roads.
SLOW TRAIN
In the 66 years since independence, India has added 13,000 km (8,077 miles) of new railway lines bringing the total size to about 64,000 km (39,767 miles).
Only 1,750 km (1,087 miles) of new lines were added by India from 2006 to 2011, compared with 14,000 km (8,699 miles) by China, according to a report by the Ernst & Young.
Consequently, road transport as a share of freight traffic has gone up to about 60 percent in India compared with about 44 percent in the United States and 22 percent in China, government and industry data shows.
The reform, which does not need parliamentary approval, has been agreed by the railways, industry and finance ministries and has been submitted for consideration by the cabinet, which could sign off on it as soon as next week, said one official. Parts of the cabinet note were seen by Reuters.
The plan is one of a series of moves the ruling Congress party hopes will help spur India's economy out of a deep slump ahead of a general election due by May in which it is expected to struggle to hold off the challenge of the opposition BJP.
Railway ministry officials expect interest from Chinese firms such as CSR Corp Ltd, Germany's Siemens, as well as Japanese manufacturers that already work in India as contractors and suppliers to the railways.
The proposal was greeted enthusiastically by Canada's Bombardier, which in 2008 set up a $940 million factory in Gujarat state to build wagons for Delhi Metro trains and plans exports to other Asian markets.
"Bombardier is bullish about the demand and the future prospects of Indian rail transportation industry," said Harsh Dhingra, chief country representative, Bombardier Transportation.
"Multinational companies from North America, Europe, the U.S. and Japan have shown a long-term commitment to set up a base and invest in India to cater to the future demand in the sector."