Railways

SUMMARY

• India has the fourth-largest rail freight carrier in the world and has the largest passenger carrier.
• 1.3 million strong workforces in Indian Railways.
• Indian Railways network spans more than 66030 km. Making it the world’s third-largest rail network.
• Indian Railways carried around 8224.12 million passengers in 2014-15 which is about 1.430 million higher than the passengers of the world put together.

FDI POLICY

100% FDI under automatic route is permitted for the following:

• Construction, operation, and maintenance of suburban corridor projects through PPP.
• High-speed train projects.
• Dedicated freight corridors.
• Railway electrification.
• Signaling systems.
• Freight terminals.
• Passenger terminals.
• Infrastructure in industrial parks pertaining to railway line/siding including electrified railways lines and connectivities to the main railway line.
• Mass Rapid Transport Systems (MRTS)

SECTOR POLICY

Policy on Participative Models for Rail Connectivity & Capacity Augmentation Projects

Indian Railways are operating in the core sector of the economy. To strengthen, modernize, and expand the railway network, the investment requirement is huge. Private sector participation would be required for the accelerated construction of fixed rail infrastructure. For this purpose, railways have formulated participative investment models for its existing shelf of projects and also for new projects. These models have only general provisions while the specific issues are decided on a case-to-case basis depending on the model of private investment, the Ministry of Railways will either grant direct permission or go in for competitive bidding for award of the concession. Under this Policy, the following can participate in the development of railway infrastructure:

Key Points in the Rail Budget 2015-16:

The Ministry of Railways issued Sectoral Guidelines for permitting domestic/foreign direct investment (FDI) in construction, operation, and maintenance in the following identified areas:-

1. Suburban corridors through PPP
2. High-speed train projects
3. Dedicated freight lines
4. Rolling stock including trains sets and locomotive/coaches manufacturing and maintenance facilities
5. Railway electrification
6. Signaling system
7. Freight terminals
8. Passenger terminals
9. Testing facilities and laboratories
10. Non-conventional sources of energy
11. Railways technical training institutes
12. Concession of standalone passenger corridors (branch lines, hill railways, etc.)
13. Mechanized laundry
14. Rolling stock procurement
15. Bio-toilets
16. Technological solution for manned and unmanned level crossings
17. Technological solutions to improve safety and reduce accidents. The guidelines will encourage foreign investors for making an investment under the ‘Make in India’ program
18. Life Insurance Cooperation will make available to the Ministry of Railways/its entities a Financial Assistance with a limit of USD 23.76 billion over the next five years for implementing railway projects
19. With the objective of cutting energy costs, the railways have signed a bilateral power procurement agreement with the Damodar Valley Corporation (DVC). Under the agreement, railways will buy 50 MW of power from DVC at Auraiya Grid Sub-station facilitated by Railways Energy Management Co. Ltd, a joint venture of the Indian Railways and RITES, a public sector unit of the Ministry of Railways
20. The Ministry of Railways has sanctioned the implementation of Eastern Dedicated Freight Corridor (EDFC) and Western Dedicated Freight Corridor (WDFC) with freight train speeds of a maximum 100 Kmph
21. Open Wi-Fi to be available at 400 railway stations
22. In Dedicated Freight Corridor 750 km of civil contracts and 1300 km of system contracts are targeted in 2015-16 with over 6608 km of track to be electrified
23. Wagon-making scheme to be reviewed to make it easier for private investment; speed on nine corridors to be increased from 110-130 to 160-200 km per hour
24. Railways to go through a transformation in five years; to increase track capacity by 10% to 1.38 lakh km
25. Replacement of 17000 more toilets by bio-toilets in 2015-16 

FINANCIAL SUPPORT

For manufacturing activity:

State Incentives:

• State governments offer additional incentives for industrial projects.  Incentives are in areas such as rebates in land cost, relaxation in stamp duty on the sale or lease of land, power tariff incentives, concessional rates of interest on loans, investment subsidies/tax incentives, backward areas subsidies, and special incentive packages for mega projects. 

Export Incentives:

• Various kinds of incentives on exports are available under foreign trade policy. 

Area-based Incentives:

• Incentives for units in Special Economic Zones (SEZ) / National Investment & Manufacturing Zones (NIMZ) as specified in respective Acts or setting up of projects in special areas such as the North-east, Jammu & Kashmir, Himachal Pradesh & Uttarakhand.

Tax Incentives R&D Incentives:

• Industry/private sponsored research programs: a weighted tax deduction is given under section 35 (2AA) of the Income Tax Act. Weighted deduction of 200% is granted to assesses for any sums paid to a national laboratory, university, or institute of technology, or specified persons with a specific direction, provided that the said sum would be used for scientific research within a program approved by the prescribed authority.
• Companies engaged in the manufacture, having an in-house R&D center. Weighted tax deduction of 200% under section 35 (2AB) of the Income Tax Act for both capital and revenue expenditure incurred on scientific research and development. (Expenditure on land and buildings are not eligible for deduction). 

INVESTMENT OPPORTUNITIES

• Components manufacturing
• Infrastructure projects
• High-speed train projects
• Railway lines to and from coal mines and ports
• Projects relating to electrification, high-speed tracks, and suburban corridors
• Dedicated freight corridors
• The re-development of railway stations
• Power generation and energy-saving projects
• Freight terminals operations
• Setting up of wagon, coaches and locomotive units
• Gauge conversion
• Network expansion