Railway Minister Sadananda Gowda (C) poses after giving the final touches to the railway budget for the 2014/15 fiscal year, in New Delhi July 7, 2014.
Lake Nicaragua or Cocibolca is part of proposed plans for a new canal that would compete with the Panama Canal.
NEW DELHI (Reuters) - Prime Minister Narendra Modi's government disappointed markets with its first major economic policy statement on Tuesday, promising to seek foreign and private funding for the railways but giving no details of how it would lure investors.
Investors had harboured expectations for Modi's government to use the railways budget - which precedes the full budget by two days - to detail widespread reform.
India's state-owned railways are the fourth-largest in the world. They have suffered from years of low investment and populist policies that have kept fares low.
But that has turned a once-mighty system into a slow, badly-congested network that crimps economic growth.
The railways cost the government around 300 billion rupees ($5 billion) a year in subsidies and spend 94 percent of revenues on operating costs, leaving next to nothing for investment.
"The bulk of our future projects will be... by the PPP model," Railway Minister Sadananda Gowda told parliament in his first budget, referring to public-private partnerships.
Gowda's speech promised to get the railways' finances in order, complete long-delayed projects, seek cabinet approval for a long-standing plan to allow foreign direct investment and jumpstart ambitious plans for high-speed rail.
The budget contained some minor measures, such as a greater use of "mechanized laundries" to eliminate the washing by hand still employed to clean much of the bedding on sleeper trains.
But it was short on details of how the wider goals would be met and how Gowda would get foreign companies such as Bombardier and General Electric to invest.
Stocks fell sharply following Gowda's speech, with the Sensex closing down 2 percent after the government dashed investors' hopes for greater spending on the railways, while bond yields rose.
The government revised up planned spending to 654.45 billion Indian rupees for the year ending in March 2015, an increase of 1.8 percent from an interim budget prepared in February by the last government.
It calculates investment in the network through public-private partnerships in 2014/15 to total 60.05 billion rupees, more than in the interim budget, but a fraction of the cash needed to overhaul the network.
RELIC OF BRITISH RULE
India's use of a railway budget separate from the national one is a relic of British rule, when the network was the country's major industrial asset and a major revenue earner. Finance Minister Arun Jaitley presents the full federal budget on Thursday.
"There is nothing in this entire budget which tells you how they will make it attractive for private sector," said Manish R. Sharma, executive director of capital projects and infrastructure at PwC India.
"Given that in the past PPP has not taken off in railways...it would be very important to see how they come up with implementable mechanisms which the private sector will buy," he said.
Stock investors also expressed doubts about the prospects for PPPs, with shares in India's railway-related stocks falling after the speech. Texmaco Rail & Engineering closed down 19.9 percent while Titagarh Wagons dropped 5 percent.
Gowda said proposed market borrowings would total 117.9 billion rupees this fiscal year, down from 128 billion rupees estimated in the interim budget.
"Budgeted outlay is looking below expectations as the government is looking for more private partnerships now than on previous occasions," said Deven Choksey, managing director at KR Choksey securities.
Reform of India's railways has long proven politically sensitive. Successive governments have backed away from modernization, preferring instead to use the system to provide cheap transport for voters, and jobs for 1.3 million people.
That sensitivity was on display on Tuesday, when supporters of India's main opposition party gathered outside Gowda's residence to protest against a recent fare rise, and one protester removed the minister's nameplate from his gate, local TV showed.
Modi's government pushed through a fare rise last month, but partially rolled it back later, under political pressure. ($1=59.7400 Indian Rupees)
(Additional reporting by Malini Menon, Manoj Kumar, Aditya Kalra, Suvashree Dey Choudhury and Abhishek Vishnoi; Editing by Frank Jack Daniel and Richard Borsuk)
On Tuesday, Indian Railway Minister  presented his first budget for Indian Railways.

The budget emphasized increased amenities for travelers, better safety, and timely completion of projects. There were no fare hikes announced as both passenger and freight fares had been increased last month. But, it was announced that fares will be revised twice a year to absorb fuel costs. Gowda criticized previous governments for announcing new projects and failing to complete them. He said projects will now be prioritized, such as decongesting major routes instead of announcing new ones. Gowda announced no major new projects, but announced 54 new trains. He also criticized the last government for driving the railways into a loss.

Gowda announced a bullet train between Mumbai and ; new semi-high speed trains in nine sectors connecting metros; and new measures towards improving cleanliness, food, and  were announced. He said  will be installed in major stations to monitor cleanliness, and major stations will have food courts serving local cuisines and precooked food from reputable catering brands will be served on-board. The railways have faced complaints of substandard food in the past.

He announced the introduction of a new rail-flaw detection system to better investigate the causes of accidents.  The budget allocated a significant sum to the construction of bridges at unmanned crossings, a major cause of rail-track deaths. He announced a new project to introduce automatic closing doors on mainline and suburban trains, and said  will be provided in larger stations and select trains.  will be available for on-board use for a fee by Business travelers. The e-ticketing system will be extended from booking tickets to booking coaches and entire trains, and also retiring rooms in stations. Electric mobility carts will be provided to elderly and handicapped passengers at all major stations.  Also,  will recruit four thousand female constables and escorted carriages will be provided for women. A significant amount was announced for improving rail connectivity in north-east India.

Gowda emphasized use of  (PPPs) to fund future projects. He also said he will ask the  to approve foreign direct investment (FDI) in Indian Railways. Some stations are to be improved using PPPs.  Manish R. Sharma, executive director of capital projects and infrastructure at , pointed out the budget didn't contain any information on how the government intends to attract private investors. Deven Choksey, managing director at K. R. Choksey securities, said the government now seemed to be more inclined towards PPPs than before. India's stock index  dropped and closed 2% below opening. Investors were observed selling shares in energy, infrastructure, and real estate sectors.