In a huge boost to India’s largest power equipment maker, it was announced on Thursday that the joint venture (JV) between Bhel and Japan’s Kawasaki Heavy Industries (KHI) will manufacture rolling stock for the bullet train project.
The announcement, which comes during the ongoing visit of Japanese Prime Minister Shinzo Abe, will help Bhel, which is positioning itself as a transportation solutions provider, given the uncertainty in India’s fast-changing power sector.
Apart from being a maker of metro and commuter trains, KHI also manufactures the Shinkansen high-speed bullet trains.
“The two prime ministers committed to advancing ‘Make in India’ and transfer of technology in HSR (high-speed rail) projects, and expressed optimism in this direction. They welcomed the series of business matching efforts to establish India-Japan cooperation, such as the prospective technology collaboration between Kawasaki and Bhel," according to a joint statement issued on Thursday.
Mint reported on 17 February that Bhel was looking to pivot from the power sector to transportation.
“Both sides will explore further strengthening of partnership in high-speed railways. They also recognized that there is potential for further collaboration between India and Japan in the modernization and expansion of the conventional railway system and the construction of metro rails in India," the joint statement added.
Bhel plans to piggyback on India’s urban challenge, with 600 million Indians expected to live in cities and towns by 2030.
This will create a transportation challenge, with metro rail being considered as a viable option.
Prime Minister Narendra Modi has spoken of plans to get metro rail in 50 cities. At present, 316km of metro rail service is under operation and 500km under construction across 11 cities.
“We are looking at transportation from a holistic stand point and apart from manufacturing coaches, the bullet train project may also include electrification, signalling, civil construction work, including rail links," a senior Bhel executive said, requesting anonymity.
Railway minister Piyush Goyal, while announcing the advancement of the bullet train deadline by a year recently, said India will adopt this technology, innovate and then export it to other countries.
The public sector unit (PSU) has already started work on becoming a turn-key metro rail end-to-end solutions provider and has a technology collaboration agreement with KHI for the manufacture of stainless steel coaches and bogies for metros.
For the bullet train, Bhel has a memorandum of understanding (MoU) which will have to be translated to a technology collaboration agreement.
A bullet train requires specialized aluminium coaches which the state-run firm plans to manufacture at its Jhansi (Uttar Pradesh) or Bhopal facility (Madhya Pradesh).
Experts say an entire ecosystem should be developed around the space.
“This is great news for Bhel and the Indian transportation sector. However, Bhel must capitalize on this opportunity to build long-term organic capability in terms of people, systems, technology. In addition, they should plan to build the ecosystem required to support this segment and also target becoming a formidable supplier in global market," said Amit Sinha, partner at consulting firm Bain and Co. who leads its industrial goods and services practice.
“The potential environmental benefits of high-speed rail (HSR) system are noteworthy as studies show that HSR system is around three times more fuel-efficient than planes and five times more fuel efficient than cars," Soumya Kanti Ghosh, group chief economic adviser, State Bank of India, wrote in a report released on Thursday.
On Thursday, the Bhel stock rose 3.66% to Rs137.40 on BSE.
While a Bhel spokesperson declined to comment, queries emailed to Kawasaki Heavy Industries on Thursday afternoon were not answered until press time.
Bhel’s order inflow has become a cause for concern despite its order book of Rs1 trillion. New orders for the first quarter this year amounted to Rs1,800 crore, down 41% on a year-on-year basis.
It registered a 3.9% increase in net profit to Rs80.8 crore on a revenue of Rs5,506.2 crore. This is putting pressure on Bhel’s manufacturing capacity of 20,000MW per annum with a limited order inflow.