New Delhi: The Indian Railways will buy 1,000 diesel train engines from the company that wins the bid to build and operate a locomotive plant at Marora in Bihar. At current prices, the order could be worth around Rs10,000 crore.
Whistling ahead: The order for 1,000 diesel engines would be spread over 10 years, and would come with a maintenance contract for 12 years. Photograph: Ramesh Pathania / Mint
This move comes after the railways provided for a similar clause in a tender proposed earlier this year for an electric locomotive factory at Madhepura, again in Bihar, the home state of railway minister Lalu Prasad.
The Marora unit is expected to cost around Rs1,000 crore to build.
Mint had reported on 1 February that the railways will buy 1,000 electric locomotives worth Rs25,000 crore from the company that wins the contract to set up an electrical locomotives factory at Madhepura. It was part of a plan to ensure rolling stock was available to the national transporter, which carried an estimated six billion people last year.
However, bidders for a number of railways’ public-private projects as well as Planning Commission officials doubt whether the plans will see the light of day, like a number of other projects.
A Planning Commission official who did not wish to be named said that there was a lack of clarity on the project. The railways had proposed to take 26% equity stake in the new production units.
The official added: “We had opposed the move on the part of the railways to take a stake in these projects. Once the guaranteed orders are serviced by the unit, what happens to the equity invested by the railways?”
A railway official, who did not wish to be identified, said the order would be spread over 10 years, and would also come with a maintenance contract for 12 years.
“We have issued the request for qualification and some of the biggest companies in the sector have indicated their interest in the project,” the official said.
A senior railway official also said some Chinese and Russian companies have shown interest in the proposed rolling stock units taken up by the railways.
Usually, the railways buys its electric locomotives from Chittaranjan Locomotive Works in West Bengal or Bharat Heavy Engineering Ltd, and diesel locomotives from Diesel Locomotive Works in Varanasi.
“The railways need an additional 30% output to meet its growing requirements and that is where the new factories will need to play a role,” said a railway official connected with the project.
“Effectively, it is the annuity model,” said Jayesh Desai, director for the transaction advisory practice of consulting firm Ernst and Young, referring to a model where the government pays a guaranteed amount for certain services, with little risk to the company providing them.
“You are getting someone to build the factory, and there is only one buyer. I think it is a good model. After all, what is the need for the railways to manufacture these things?”