The Indian Railways is getting ready to place a Rs25,000 crore order, its largest ever, for 1,000 electric locomotives that it will buy over eight years.
The company winning this order will also get to set a locomotive factory in Madhepura, Bihar, at a site provided by the railways, which will have a minority stake in this facility.
The order is likely to attract the interest of multinational firms such as General Electric Co., Bombardier Inc. and Siemens AG. Rajeev Jyoti, president and managing director of Bombardier Transportation India Ltd, said the firm would definitely bid for the tender for locomotives. Executives at GE India and Siemens India could not be reached for comment.
Mint had earlier reported on the proposed locomotive plant at Madhepura, but it is only now that the railways has disclosed that the firm winning the contract would have guaranteed orders for eight years.
“Every year, we expect over 100 locomotives to be delivered,” said a railway official involved in the project, who did not wish to be identified.
Railway Board chairman K.C. Jena was unavailable for comment.
Details of the order for locomotives came to light after the railway ministry issued a request for proposal (RFP) to appoint consultants to prepare bid documents for the tender. In the RFP document, the railways has said that the contract for procurement would last for eight years and 1,000 locomotives have to be delivered by the supplier in this period. The railway official said that each locomotive would cost around Rs25 crore.
Long haul: This is the first time that Indian Railways is trying to meet its requirements for eight years through a single contract. (Ramesh Pathania / Mint )
The contract for procurement of locomotives will also include their maintenance for up to 20 years.
The railways estimates it will need around 1,800 locomotives over the next five years and the ministry is concerned it may be able to meet only half the demand through Chittaranjan Locomotive Works (CLW), located in West Bengal. CLW, owned by the ministry, currently has a capacity to manufacture about 150 electric locomotives a year. This is being increased to 200 a year.
When the order is placed, it will be the first time the railways will be trying to meet its requirements for eight years through a single contract.
Audit and consulting firm PricewaterhouseCoopers was a consultant to the railways in the preparation of a project report for the tender. Amrit Pandurangi, executive director at PwC, said placing an order of this size would ensure that the railways did not face a supply crunch at any point of time. “Indian Railways is doing this (making a long-term commitment for supply of locomotives) for the first time. But the aviation industry always procures (for the) long term,” Pandurangi added.
A Planning Commission official, who did not wish to be identified, said placing a long-term contract would give a huge cost benefit to the railways. “It needs state-of-the-art locomotives. If it was to sign long-term contracts with vendors, it would help it get better supplies at cheaper rates.”