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Govt shortlists five MNCs for $8 bn Indian Railways orders

Govt shortlists five MNCs for $8 bn Indian Railways orders
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First Published: Fri, Oct 03 2008. 12 46 AM IST

Joining hands: Indian Railways will hold 26% stake in each of the projects. Winning bidders will own the rest. Harikrishna Katragadda / Mint
Joining hands: Indian Railways will hold 26% stake in each of the projects. Winning bidders will own the rest. Harikrishna Katragadda / Mint
Updated: Fri, Oct 03 2008. 12 46 AM IST
New Delhi: Five multinational companies (MNCs) have been shortlisted for two separate contracts, jointly worth an estimated $8 billion (Rs37,600 crore), to manufacture and supply locomotives for the Indian Railways.
Germany’s Siemens AG, Bombardier Transportation India Ltd, a unit of Canada’s Bombardier Inc., and France’s Alstom SA will now vie to secure an order to build and supply at least 660 electric locomotives for the railways.
And US-based General Electric Co. (GE) and Electro Motive Diesel Inc. (EMD) will compete for the second contract—to build and supply 1,000 diesel train engines for the national transporter.
While GE, Bombardier and Siemens confirmed that they have been shortlisted, emails to EMD and Alstom remained unanswered till late Thursday evening.
Joining hands: Indian Railways will hold 26% stake in each of the projects. Winning bidders will own the rest. Harikrishna Katragadda / Mint
The electric locomotives will be manufactured at a factory in Madhepura and the diesel ones at Marora—both in railway minister Lalu Prasad’s home state, Bihar.
The estimated value of the projects is based on the average cost of locomotives.
The railways will hold 26% equity stake in each of the projects. The companies that win the bids—one for each project—will hold the rest.
The winning bidders have to supply locomotives to the railways over a 10-year period and also maintain them for 15 years, according to a Planning Commission official, who did not wish to be named.
Request for proposals or price bids—the last stage in the procurement process according to government-mandated norms—were floated last week. The bids are expected to be opened by this November-end, this official said.
Winning bidders will be decided on the price they quote per locomotive, with maintenance fees being a percentage of the total order, he added.
Mint had reported on 22 May that the railways would buy 1,000 locomotives from firms that win the contracts.
“For the first two-three years, until the factories are set up, the railways would buy imported engines (from the winning bidders),” the Planning Commission official said.
The railways usually buys its electric locomotives from Chittaranjan Locomotive Works in West Bengal or from state-owned Bharat Heavy Electricals Ltd, and diesel locomotives from Diesel Locomotive Works in Varanasi. These factories are, however, hard-pressed for capacity. Last year alone, the railways carried around six billion passengers.
Analysts are of the view that the winning bidders will be well-placed to exploit economies of scale in expanding their operations in the country. “From the India perspective, this is a huge order,” said Amrit Pandurangi, who heads the infrastructure and transport practice for consulting firm PricewaterhouseCoopers Pvt. Ltd (PwC).
“These are long-term contracts spread over 15 years, so it will give the companies a foothold in the Indian market and will allow them to exploit the economies of scale because they will already have factories here,” he said. PwC is advising the railways on the diesel locomotive bids.
rahul.c@livemint.com
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First Published: Fri, Oct 03 2008. 12 46 AM IST