The Telegraph
Thursday , July 24 , 2014
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Decision soon on FDI in rail, defence

New Delhi, Jul 24 (PTI) : The government may soon take a decision on easing foreign direct investment (FDI) in the Railways and Defence production, with the Department of Industrial Policy & Promotion awaiting final comments from the ministries concerned on the proposals, which will then go to the Union cabinet.

DIPP secretary Amitabh Kahnt said the Cabinet Committee on Economic Affairs has approved FDI cap of 49 per cent insurance, against 26 per cent now, and the Cabinet notes for the railways and defence are under the final consultative process.

“Once we get the final comments, we will put them up to the Cabinet for approval,” Kant said on the sidelines of the Confederation of Indian Industry’s Invest North Summit here Thursday.

The government proposes to hike the FDI limit in the sensitive defence sector to 49 per cent from 26 per cent now, ensuring control in Indian hands, for boosting domestic industry of a country that imports up to 70 per cent of its military hardware.

Besides, it also plans to ease FDI norms for the cash-starved Indian Railways. The DIPP has proposed 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 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 following concerns being raised by the Urban Development Ministry on a few norms.

The DIPP has proposed easy exit conditions 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.

The government has also suggested a uniform minimum capitalisation of $5 million for both wholly-owned subsidiaries (WOS) and joint ventures with Indian partners in the construction sector.

At present, the capitalisation requirement for such subsidiaries is $10 million.

Elaborating on the measures taken by the government to improve the ese of doing business in India, Kant said: “We have already built the e-biz platform. So all departments will come online, so that there is no human intervention,” he said.

“In fact, the DIPP has already put the industrial licensing and entrepreneurs’ memorandum on the e-business platform. Our target is that by December 31, 2014, all departments should get online through the e-biz platform,” he said.