The Railway Board has decided to restrict private participation in some key manufacturing units it wants established to international equipment majors such as General Electric Co., Bombardier, Siemens AG and Alstom. “We need companies with considerable experience and the ability to handle large projects,” said a railway official familiar with the matter.
The board has firmed up eligibility conditions for deciding on the companies that will be allowed to set up a wheel factory at Chapra, a diesel locomotive factory at Marora, an electric locomotive factory at Madhepura, all in Bihar, and a coach factory at Rae Bareli in Uttar Pradesh.
The total investment in these four projects is around Rs4,000 crore but, more significantly, the board’s decision indicates the kind of companies Indian Railways is looking at to set up railway equipment factories—at a cost of Rs70,000 crore over the next five years. Officials at Indian Railways said the norms decided by the board would remain the same for similar projects.
The railways has estimated that it will invest around Rs2.20 trillion in the next five years and wants around 30% of this to come from the private sector through the public-private-partnerships (PPPs).
Companies chosen for such projects benefit by having a ready market for their products. And Indian Railways gains by attracting private capital to a business that has thus far remained a government monopoly.
Railway officials say the board has finalized a two-stage tendering process. In the first stage, it will invite an “expression of interest” from all companies.
However, the “request for proposal”, that will follow in the second stage, will be extended only to companies with proven technical and financial capabilities.
Amrit Pandurangi, an executive director with PricewaterhouceCoopers, which has been appointed consultant to the process, said it is likely that only the “serious” players will be selected to the second stage where requests for proposals would be called for. “Definitely, it will be somebody who has good experience and technology,” he added.
Pandurangi said GE, Bombardier, Siemens and Alstom would likely form consortiums with Indian equipment makers and financial institutions while bidding for the projects.
“The big companies would need some kind of partnership in the local market,” he added. Pandurangi declined to respond to a specific query on whether public sector firms Bharat Earth Movers Ltd or Bharat Heavy Electricals Ltd would be considered for the projects.
Dhananjay Nalwade, president and chief executive officer of GE Equipment Services, said there was not much possibility of the larger multinational companies joining hands to bid for the projects. “In a typical consortium, we may have a financial partner and someone who knows the local market but that’s all,” he added.