New Delhi: The global slowdown prevented Electro-Motive Diesel Inc., or EMD, one of the two companies that were shortlisted for a multi-billion-dollar diesel locomotive factory in Bihar, from bidding for the project that was eventually delayed.
Right mix: Hamilton says public-private partnerships ought to enhance Diesel Locomotive Works’ capabilities. Ramesh Pathania / Mint
The Illinois, US-based firm, which made its first technology transfer to the Indian Railways in 1959, is ready to bid for the project if it comes up again, says president and chief executive John S. Hamilton.
EMD recorded $1.8 billion (Rs8,802 crore) in global sales in 2008-09, making it one of the largest builders of diesel-electric locomotives for railroads. And it will continue looking to increase its business in India, which has among the world’s largest railway networks, either through technology transfers or by bidding for projects in public-private partnerships (PPPs), says Hamilton. Edited excerpts:
How big is the India business opportunity?
DLW (the Indian Railways’ Diesel Locomotive Works at Varanasi, Uttar Pradesh) has set as its production target for the next few years roughly 200 locomotives. It has produced two kinds of locomotives: (from) Alco (American Locomotive Co.) technology, which was transferred decades ago, and EMD. So its goal was to stop producing Alco and produce only EMD. That will move it from the roughly 80 locomotives that it has in its plan this year to 200 EMD locomotives... India as a country needs more than 200 (a year).
So, if we go from 80 to 200, then our $60-70 million will go up to $200 million or thereabouts.
We also recognize the benefit of producing some of the stuff—that we now sell to DLW—indigenously. So part of our goal is to continue to introduce advanced technologies so that we can continue to participate in a sales way with these new technologies, while at the same time encouraging—and not resisting—the indigenization of some of these products.
The railways has been talking about PPPs in locomotive creation, while your strategy over the past 50 years in India has been technology transfer. You also started bidding for the locomotive factory in Bihar but pulled out. Do you see yourself migrating to that format?
Yeah, we’re prepared to do that. We were prepared to do it last time. We invested quite a lot in preparing ourselves to bid on the last PPP.
As I mentioned, the external financial environment made it a tough project to finance. If IR (Indian Railways) chooses to go back in that direction, we will support it. But here’s perhaps the difference. Establishing a new facility somewhere...is a very long process. So we think that IR’s immediate goals can be advanced through the kind of things that I was talking about.
The technologies that we are introducing are the same technologies we use everywhere else in the world. So there’s no delay in getting it here. So we think the goals that PPPs are designed to achieve can be achieved in this different format of a PPP.
We also think, as we look at DLW’s ultimate capacity and the ultimate capacity of the Indian supply chain, that if it were to grow beyond 200-250 or 300-350 (locomotives), there are some parts—there are 6,000 individual parts in a locomotive—which really ought to be built in India and there are others which are just easily imported.
So PPP ought to focus on those things that are, in essence, de-bottlenecking the capabilities of DLW.
How different were the specifications for the locomotives in that RFQ (request for quotation, inviting bids for the Bihar project)?
It’s quite a bit different. It’s not a huge difference in terms of the sophistication of the technology, but it’s a huge difference in terms of what I would describe the product manifestation of the technology. The engine that’s in this locomotive is our 710 engine; (it) has 16 cylinders. That’s where it gets its horsepower (HP) from. The 5,000HP engine is the same engine, with 20 cylinders. Part of the old PPP asked for 6,000HP.
Apart from North America, what is your largest market?
You know it really depends on the year. But generally speaking, Europe is a strong market for us. India is a strong market for us. China, these days, is a huge market for us. Australia is a big market for us. And South Africa.
The railways has a big ongoing electrification drive as a matter of policy. What does this mean for companies such as yours? And is electric the right way to go?
We have made electric locomotives in the past. Not our strength but we know how to do it... There really is not an answer that transcends all countries’ geographies and freight.
So, (in) Europe, which is generally viewed as where everything is electrified, we sell a lot of diesel locomotives... They run on electric track(s).
And the reason for that is in Europe, as the rail industry deregulates, what you find is the new operators need to be able to pick up at the customer and deliver to the port or the other way around and electrification never goes all the way to the customer. What we also find in countries such as South Africa is the electric power grid has difficulty staying reliable.
And then, I think the issue that you are raising is of critical importance—there’s so much demand for electricity in countries like this. There’s a statistic that I’ve been told: If you take an electric locomotive off the track and replace it with a diesel locomotive, you’ve added 8MW to the power supply available for other uses. So, if you have a 100 locomotives you do that to, that’s 800MW and that’s a power station.