Railways

OUTLINE

  • India has the fourth largest rail freight carrier in the world and has the largest passenger carrier
  • 3 million strong workforces in Indian Railways
  • Indian Railways network spans more than 66030 km, 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
  • 100% Foreign Direct Investment (FDI) in the railway infrastructure segment has been allowed recently which has opened up opportunities for participation in infrastructure projects such as high-speed railways, railway lines to and from coal mines and ports, projects relating to electrification, high-speed tracks and suburban corridors
  • Indian Railways envisages a prospective investment of USD 130.76 billion in the next five years

The formation of special purpose vehicle (SPV) companies under the PPP model has been proposed to boost business activity in and around ports and mines through increased last-mile connectivity.

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

  • State Governments
  • Local bodies
  • Beneficiary industries
  • Ports
  • Large import and export companies
  • Co-operative Societies and other corporate bodies
  • Infrastructure and Logistics providers
  • Person of Indian Origin (PIO)
  • Overseas Corporate Bodies (OCB) (After foreign investment promotion board clearance)
  • Foreign Direct Investor (After foreign investment promotion board clearance)

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. Concessioning of standalone passenger corridors (branch lines, hill railways etc.)
  13. Mechanised laundry
  14. Rolling stock procurement
  15. Bio-toilets
  16. Technological solutions for manned and unmanned level crossings
  17. Technological solutions to improve safety and reduce accidents. The guidelines will encourage foreign investors to make their investment under the ‘Make in India’ programme
  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 has 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 implementation of Eastern Dedicated Freight Corridor (EDFC) and Western Dedicated Freight Corridor (WDFC) with freight train speeds of maximum 100 Kmph
  21. Open Wi-Fi to be available at 400 railway stations
  22. In Dedicated Freight Corridor, 750 kms of civil contracts and 1300 kms of system contracts are targeted in 2015-16 with over 6608 kms 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 kms per hour to 160-200 kms per hour
  24. Railways to go through transformation in five years; to increase track capacity by 10% to 1.38 lakh kms
  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 given 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 programmes: a weighted tax deduction is given under section 35 (2AA) of the Income Tax Act. Weighted deduction of 200% is granted to assessees 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 programme approved by the prescribed authority
  • Companies engaged in manufacture, having an in-house R&D center: a 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 is provided (Expenditure on land and buildings are not eligible for deduction)
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