Business Standard: November, 2015
New Delhi: Bihar got two major foreign direct investment (FDI) projects in railways on Monday, a day after it rejected Prime Minister Narendra Modi's National Democratic Alliance in Assembly elections.
US-based GE got the contract for the Rs 14,656 crore diesel locomotive factory at Marhowra, 81 km north of state capital Patna. French transport giant Alstom got the electric locomotive project, worth Rs 20,000 crore in Madhepura, about 280 km northeast of Patna.
These are the first major projects of their kind in the sector. They have been awarded less than two months after the Prime Minister's Office (PMO) pulled up Railways Minister Suresh Prabhu for lack of progress in major projects in the sector.
"Indian Railways has taken a giant leap in making 'Make in India' a success by issuing the Letter of Award (LoA) for setting up a diesel locomotive factory at Marhowra and procurement and maintenance of mainline diesel electric locomotives to GE Global Sourcing India," Railway Board's Member (Mechanical) Hemant Kumar said.
With the government allowing 100 per cent FDI in the railways, the infrastructure of the most important mode of public transport in the country is likely to get a major boost with the setting up of these two joint venture projects.
Both projects were announced by former railway minister Lalu Prasad - whose Rashtriya Janata Dal won big in Bihar - in 2007 but got mired in delays and controversies and could not take off.
Prabhu had asked the Board to speed the two major FDI projects, officials said.
In a statement, GE said the deal - the largest it has landed in a century in the country - reinforces India's position as a global manufacturing destination. The company will also build maintenance sheds at Bhatinda in Punjab and Gandhidham in Gujarat.
It said the project would prove to be a major boost for railway's modernisation efforts and will provide skill development opportunities for local talent. "This infrastructure project is further evidence of India's position as a growth engine for Asia," GE Chairman and CEO Jeff Immelt said.
Apart from GE, three other companies - including US-based Electro-Motive Diesel and two Chinese firms - were in the race for the Marhowra project.
The Chinese firms were disqualified by the railway ministry and the request for proposal (RFP) was issued to the two shortlisted bidders on 11 March. The final bid was opened on 1 September.
Now, a joint venture (JV) company, with the railway minister and GE together, will be set up to construct and run the Marhowra factory.
"The railway ministry will have 26 per cent equity in the JV company, subject to a maximum of Rs 100 crore. Railways has completed the acquisition of 226 acres of land for this project. The factory is expected to be established within the next three years at a cost of Rs 1,000 crore," Kumar said.
The company will work on an assured off-take model of 100 locomotives per annum for 10 years. The basis cost of 1,000 freight locos will be around Rs 14,656 crore. The company will also maintain the locomotives for 13 years, after which the Indian Railways will take over. The locomotives will also support the upcoming dedicated freight corridors on the Delhi-Mumbai and Delhi-Kolkata routes. The ministry said the project will lead to setting up of support ancillary industries in Bihar, promote fuel efficiency through latest technology and push indigenisation of production within two to three years of commencing operations. As part of the pact, GE will import 100 locomotives and manufacture the rest 900 at the factory.
A senior railway ministry official said as part of the Madhepura contract, Alstom will supply 800 locomotives over 10 years. Apart from manufacturing 80 locomotives a year, the company will maintain them for 12 years.
The government had shortlisted three global companies - Alstom, Bombardier and Siemens.