Rail ministry to revive $6 bn locomotive project

Rail ministry to revive $6 bn locomotive project
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First Published: Tue, Sep 08 2009. 11 02 PM IST

From the past: The project originally envisaged the production of nearly 2,000 diesel and electric locomotives over an eight-year period. Rajkumar / Mint
From the past: The project originally envisaged the production of nearly 2,000 diesel and electric locomotives over an eight-year period. Rajkumar / Mint
Updated: Tue, Sep 08 2009. 11 02 PM IST
New Delhi: The government has decided to revive an ambitious $6 billion (Rs29,220 crore) project to build diesel and electric locomotives.
The project, which was originally conceived as a joint venture and which later became an arm of the Indian Railways, was in limbo after its prime mover, former rail minister Lalu Prasad, failed to retain his post when the Congress-led United Progressive Alliance regained power in the 15th Lok Sabha election.
However, it seems to have acquired a fresh lease of life with new rail minister Mamata Banerjee approving a proposal to formulate a cabinet note on developing two locomotive factories—one electric and one diesel—as joint ventures with private sector partners, and not arms of the railways, according to two railway ministry officials who did not want to be identified.
From the past: The project originally envisaged the production of nearly 2,000 diesel and electric locomotives over an eight-year period. Rajkumar / Mint
Both officials, however, declined comment as to when this note would be drafted.
The project originally envisaged the production of nearly 2,000 diesel and electric locomotives—at Marhowra and Madhepura, respectively— over an eight-year period, with the winning bidder expected to maintain the locomotives for a specified number of years.
Five companies, Siemens AG, General Electric Co., Bombardier Inc., Alstom SA and Electro-Motive Diesels Inc., were originally shortlisted for the project.
The factories were later converted into departmental units by Prasad after several shortlisted bidders failed to put in bids for a variety of reasons, including the global economic slowdown.
“Once the cabinet note is prepared, it would have to go through the IMG (inter ministerial group) process,” said one of the railway officials.
The Planning Commission had always been of the opinion that the locomotive factories should be built with the involvement of the private sector, as opposed to departmental units, this person added.
“Our view is always that a JV (joint venture) is better,” said a Planning Commission official who did not want to be named. “There cannot be a PPP in this because there are no services,” the official said.
PPP refers to a public-private partnership, where a private sector company develops the infrastructure and offers an allied service for a fee (such as tolling) for a specified number of years.
Confirming the move by the railways, an executive with one of the previously shortlisted bidders said he had been “unofficially” told the railways was looking to restart the process.
“They did mention one (other) thing. Having learnt from the past, they will modify a few of the terms (of the deal) that prevented some companies from bidding,” he added, asking not to be named citing company policy. The executive said he was told that once the cabinet note is put out, there would be a pre-bid conference and an empowered committee would be set up to make decisions without the issue having to go back to the cabinet.
A Siemens spokesperson said the company would not like to comment at this stage. Bombardier spokesperson Mahesh Ahuja said while the company was awaiting the final decision of the railways, the company was keen to participate in the forthcoming railway projects.
“To my mind, it is a step in the right direction,” said Arvind Mahajan, an executive director with KPMG Advisory Services Pvt. Ltd, adding that the railways should give companies enough time and set appropriate timelines if it wanted them to invest in the production units, as opposed to selling the technology as in the past.
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First Published: Tue, Sep 08 2009. 11 02 PM IST