According to local media reports, in October, India rejected bids from two Chinese companies -- CSR Corp and China CNR Corp to set up locomotive plants under the public-private partnership model.
Current policy only allows direct foreign investment in urban metro projects.
Any investors in building track will still have to overcome the administrative hurdles such as project approvals and land disputes that meant investment by private Indian companies in railways has not met government goals.
In the five-year period to April 2012, the railways only saw 4 percent of $16 billion investment targeted through public-private partnerships.
General Electric Co, the world's largest maker of diesel locomotives, said it would prefer a public-private partnership to make locomotives with Indian Railways for new projects, but despite a lot of discussion, "progress has been very slow".
The U.S. company said it would welcome any steps to open India's railways to foreign investment.
"Any fresh impetus to expedite private sector participation on existing project plans, as well as new areas, would be a welcome step in the right direction," said Nalin Jain, South Asian business leader for GE's transportation unit.
GE, which has operated in India since 1902 and has nearly 15,000 employees there, said it has submitted a formal proposal to manufacture locomotives in India and was also trying to sell its train signalling and speed control products for various subway projects around the nation.