Government May Soon Decide on FDI in Rail, Defence Sectors

The government may soon take a decision on easing FDI in Railways and Defence sectors, with the Department of Industrial Policy and Promotion awaiting final comments from the concerned ministries to put these proposals for consideration of the Union Cabinet.

"The CCEA has approved the 49 per cent FDI in insurance and the Cabinet notes for Railways, Defence are under the final consultative process. Once we get the final comments, we will put them up to the Cabinet for approval shortly," DIPP Secretary Amitabh Kant said on the sidelines of the CII Invest North Summit here today.

The government proposes to hike the foreign direct investment (FDI) ceiling in the sensitive defence sector to 49 per cent from 26 per cent, ensuring control in Indian hands, for boosting domestic industry of a country which imports up to 70 per cent of its military hardware.

Besides, it also plans to ease FDI norms for the cash-starved Railways. The Department of Industrial Policy and Promotion (DIPP) has proposed permitting 100 per cent FDI in areas such as high-speed train systems, suburban corridors and dedicated freight line projects implemented under PPP mode.

The FDI liberalisation in the sector would help in modernisation and expansion of the Railways.

According to estimates, the sector is facing a cash- crunch of around Rs 26,000 crore. However, FDI is not proposed to be allowed in train operations and safety.

At present, there is a complete restriction on any kind of FDI in the Railways sector except mass rapid transport systems. The move will also help in development of its infrastructure for industrial purposes.

Asked about the status of FDI in Construction sector, Kant said: "That is also at a fairly advanced stage now. The final process of interaction is on".

In November last year, the proposal of the DIPP to relax FDI norms in the sector was discussed at the Cabinet meeting but was deferred due to concerns being raised by the Urban Development Ministry on few norms.

The DIPP has proposed easy conditions for exit for developers before the three-year lock-in period and a change in the current requirement of having a minimum built-up area for FDI in construction development projects.