India moved to allow foreign investments in its state-run, colonial-era railroad network on Tuesday, a key reform outlined in a new railway budget that also vowed to build a corridor of hi-speed trains and radically overhaul services.
The move to invite private investors will likely help bring in billions of dollars needed to boost the country’s rail infrastructure has suffered from years of low investment and populist policies to subsidise fares.
It also signals Prime Minister Narendra Modi’s appetite for tough decisions on politically sensitive issues such as reforming the railways. Financial analysts had been looking for announcements in the railway budget for reform measures as a sign that the national budget due Thursday would contain investor friendly measures.
Presenting his maiden budget, railway minister DV Sadananda Gowda told Parliament his ministry would seek cabinet approval for allowing foreign direct investment in the cash-strapped network. Such investments will, however, not be allowed in operating services.
Sadananda Gowda (right) arrives to present the railway budget for the 2014-15 fiscal year. (Reuters Photo)
The move to invite private investors will likely help bring in billions of dollars needed to boost the country’s rail infrastructure has suffered from years of low investment and populist policies to subsidise fares.
It also signals Prime Minister Narendra Modi’s appetite for tough decisions on politically sensitive issues such as reforming the railways. Financial analysts had been looking for announcements in the railway budget for reform measures as a sign that the national budget due Thursday would contain investor friendly measures.
Presenting his maiden budget, railway minister DV Sadananda Gowda told Parliament his ministry would seek cabinet approval for allowing foreign direct investment in the cash-strapped network. Such investments will, however, not be allowed in operating services.
Sadananda Gowda (right) arrives to present the railway budget for the 2014-15 fiscal year. (Reuters Photo)
"Internal revenue sources and government funding are insufficient to meet the requirement,” Gowda said.
“Hence, the ministry of railways is seeking Cabinet approval to allow FDI in rail sector."
He said the government would focus on raising finance through public-private partnerships to modernise the decrepit and overburdened train network that has held back growth in Asia’s third-largest economy.
The fourth largest railway network in the world, Indian Railways transports 23 million passengers a day. It is also one of the world's biggest employers with more than 1.3 million employees. The network lost $5 billion last year. A 2012 government-funded report said the railways need nearly $93 billion over the next five years to upgrade infrastructure.
One of the first tough measures Modi announced after coming to office was to raise passenger fares by 14.2% and freight rates by 6.5%, a politically bold move considering that the hike was steepest in 15 years.
From announcing special lines to expedite coal transportation in an energy-starved country to running new trains connecting various pilgrim spots, Gowda promised to improve amenities and on-board catering as well as a cleaner travel experience.
He proposed India's first bullet train to run on the Mumbai-Ahmedabad track in western India besides also promising to start work on a hi-speed rail corridor connecting the major metros. His budget also proposed introducing 58 new trains, most of them in western and southern India.
“Hence, the ministry of railways is seeking Cabinet approval to allow FDI in rail sector."
He said the government would focus on raising finance through public-private partnerships to modernise the decrepit and overburdened train network that has held back growth in Asia’s third-largest economy.
The fourth largest railway network in the world, Indian Railways transports 23 million passengers a day. It is also one of the world's biggest employers with more than 1.3 million employees. The network lost $5 billion last year. A 2012 government-funded report said the railways need nearly $93 billion over the next five years to upgrade infrastructure.
One of the first tough measures Modi announced after coming to office was to raise passenger fares by 14.2% and freight rates by 6.5%, a politically bold move considering that the hike was steepest in 15 years.
From announcing special lines to expedite coal transportation in an energy-starved country to running new trains connecting various pilgrim spots, Gowda promised to improve amenities and on-board catering as well as a cleaner travel experience.
He proposed India's first bullet train to run on the Mumbai-Ahmedabad track in western India besides also promising to start work on a hi-speed rail corridor connecting the major metros. His budget also proposed introducing 58 new trains, most of them in western and southern India.
Gowda’s budget also spoke of restructuring the powerful railway board to delink policymaking and announced plans for a railway university.
Later Modi said in a televised address that the railway budget had kept in mind the development of India.
“This budget shows where we want to take the railways and at the same time where we want to take India through the railways,” the prime minister said.
Later Modi said in a televised address that the railway budget had kept in mind the development of India.
“This budget shows where we want to take the railways and at the same time where we want to take India through the railways,” the prime minister said.
HT
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