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Friday, 14 March 2014 01:23
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Right decision to move on FDI in Railways

Though the government is technically a lame duck one once the election code of conduct is announced, not allowing it to take any decisions is tricky given the time it will take for the next government to be in place. While the solution offered, to get the Election Commission’s approval for each decision, sounds the perfect solution in principle, it can be problematic since this can end up being a bottleneck; the other problem with this is that it gives bureaucrats yet another excuse to not work for the next few months as any decision can be seen as violating the model code of conduct. Which is why the government has done the right thing, as we have reported today, to go on with the business of governance, if need be by continuously knocking at the doors of the Election Commission.

In the case of the proposal to allow FDI in railway infrastructure development through the PPP route, for instance, the Cabinet note was floated many months ago and all inter-ministerial comments were received and taken note of. FDI is, in any case, allowed in the sector even today, but each case has to be approved of by the Foreign Investment Promotion Board (FIPB). All that the government is seeking to do is to let the funds come in through the automatic route, that FIPB approval need not be sought each time given how, over a period of time, it has been seen that FIPB approvals get delayed inordinately. Given the urgent need of the Railways to augment investment, PPPs are the most logical way to go, indeed the only way to go. And there is no reason why foreign funds should not be allowed in this area, more so since foreign players also bring a lot of technical expertise with them.

Ditto for allowing FDI in e-commerce, another proposal that the government had begun consultation on, and all inter-ministerial discussions had taken place before the model code of conduct was put in place. Even more curious, in this case, although the law does not allow FDI in B2C—that is, to retail customer—there are a large number of B2C e-commerce firms that have FDI. The way they have done this is to have a B2B entity—where FDI is allowed—and when a retail customer places an order, it is on the B2C firm which, in turn, sources the goods from the B2B firm. Allowing FDI in e-commerce, then, just removes a meaningless restriction. It is to be hoped that, in the time that is left with the government, it continues to take decisions which will be referred to the Election Commission—India’s economy is too precarious to leave it on hold for over two months.


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