With the Home Ministry according in-principle nod to foreign direct investment (FDI) in railways, the Cabinet is likely to consider later this month the proposal to open the sector to foreign investment.
At present, there is a complete ban on FDI in the railways sector except the mass rapid transport systems.
The Department of Industrial Policy and Promotion (DIPP) has proposed 100 per cent FDI through automatic route in the cash-starved railways sector.
"DIPP has received the comments of the Home Ministry in which it has given in-principle approval to the proposal (to allow FDI in railways). Cabinet will take up the issue later this month," said an official.
According to the proposal, foreign investment would also be allowed in "sub-urban corridor, high-speed train systems and dedicated freight line projects implemented in PPP mode".
However, FDI will not be allowed in areas related to train operations and safety.
DIPP has also suggested that companies should be allowed to pick up 100 per cent stake in the special purpose vehicle (SPV) that will construct and maintain rail lines connecting ports, mines and industrial hubs with the railways network.
The move will help development of infrastructure for industrial purposes.
Industrial development and exports have been suffering on account of poor infrastructure which hampers output and raises the cost of production.
It is felt railways can play a role in providing reliable transport facility necessary for promoting industrial growth.