GE Transportation, Bhel eye tie up for diesel locomotives

GE Transportation, Bhel eye tie up for diesel locomotives

New Delhi: Rail products maker GE Transportation, a unit of US conglomerate General Electric Co. (GE), will tie up with state-owned Bharat Heavy Electricals Ltd (Bhel) to manufacture and deliver 1,000 diesel locomotives to the Indian Railways, provided it wins the order estimated to be worth more than Rs10,000 crore.

GE Transportation and American firm Electro-Motive Diesel Inc. have been shortlisted for the tender, designed to meet the railways’ growing demand for locomotive and relieve local factories that are hard-pressed for capacity.

Whichever company wins the contract would have to enter into a joint venture with the railways in which it would hold a 74% stake, with the national transporter taking the remaining 26%. The new entity will set up a diesel locomotive factory in Marora, Bihar.

If GE Transportation wins the contract, it will transfer a part of its stake to Bhel, said Pratyush Kumar, president and chief executive of the Indian arm of GE Infrastructure, which oversees related businesses. “The tender only stipulates that the winning company has to hold 51% or more in the joint venture," he said.

Bhel is likely to be given a 23% stake in the joint venture, he added.

A Bhel spokesman confirmed that the company was tying up with GE.

Kumar also said the company had bid for the project as a single entity and not as a partner of Bhel.

While GE would bring technology and expertise to the venture, Bhel is expected to help meet the project’s logistical and labour requirements.

The Railway Board, the apex decision-making body of the railway ministry, has permitted such an arrangement. “Our only concern was that the selected party should not control the company (fully). They are free to transfer a share from its stake in the company," said a board official, asking not to be named.

He also said the land acquisition for the locomotive project was “on target".

Asked whether the current global financial crisis would affect GE’s expansion plans, especially in the infrastructure sector, Kumar said the company may turn selective about where it spends the money, but would continue to invest where it matters.

“This (railways) is our core business. We are the leaders in this space," he said, adding that GE would invest around $400 million (Rs1,952 crore) in this project.

The railways has decided that it will initially buy imported engines from the winning bidder and then start acquiring them from the new factory.

Usually the railways buys its diesel locomotives from Diesel Locomotive Works in Varanasi and electric locomotives from Chittaranjan Locomotive Works in West Bengal, or from Bhel. These factories are, however, hard-pressed for capacity.

According to the 11th Plan, the Indian Railways would require at least 1,800 diesel locomotives to meet the growing demand by 2012. The railways carried 728.4 million tonnes of freight during 2006-07 and expects to haul 1.1 billion tonnes by 2012.

The railways is in the process of constructing a dedicated freight corridor connecting Delhi with Mumbai and Punjab with Kolkata and would require several diesel locomotives to run on the new routes.

The Marora project is separate from an electric locomotive factory being set up in Madhepura, also in Bihar, on similar lines. 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.