L&T set to win Rs1,000 crore contract for railways factory

L&T set to win Rs1,000 crore contract for railways factory

Mumbai: India’s biggest engineering and construction firm, Larson & Toubro Ltd (L&T), is close to winning a Rs1,000 crore deal to design and build a 100,000 units a year rail wheel manufacturing plant at Chhapra district in Bihar.

“L&T has emerged the lowest bidder when the price bids for the contract were opened on 29 October," said a railway ministry official overseeing the tender who did not want to be identified. Tata Projects Ltd was the only other contender for the contract. The ministry is expected to make an official announcement on the winner in the next few days, the official added.

An L&T spokesman declined to comment on the issue.

If L&T gets the contract, it will be the second big deal the firm has won in early November and late October.

On Thursday, L&T will sign a deal approximately worth Rs5,000 crore with the Mumbai International Airport Ltd, the firm that runs India’s second busiest airport, for the reconstruction of the domestic and international terminals including runways and a new integrated cargo complex.

The new rail wheel-making factory in Chhapra is being set up to cater to the growing requirements of wheels by Indian Railways. Currently, wheels are supplied by Rail Wheel Factory, the in-house wheel making unit for Indian Railways, that can manufacture 120,000 units a year.

An additional 70,000 units are produced by the Durgapur steel plant of the state-run Steel Authority of India Ltd (SAIL). The balance is imported. Indian Railways requires close to 300,000 wheels a year.

Once the Chhapra unit starts production, Indian Railways would be able to meet its requirements locally without resorting to imports, the official said. The wheels rolling out of the Chhapra plant will be used for the freight wagons operated by Indian Railways.

L&T is expected to start work on the plant within a month of signing the contract and complete the project in 24 months. Trial production is expected to start in December 2008.

Though Indian Railways plans to make wheels on its own when the factory is complete, it could consider partnering with a private sector firm, said the official. “The ministry, or one of its public sector undertakings, would hold a 26% stake in the venture with the private entity holding the majority 74% stake."

In the power sector, L&T MHI Boilers Pvt. Ltd, a joint venture (JV) between L&T and Mitsubishi Heavy Industries Ltd, is considering doubling to 6,000MW the capacity of its boiler manufacturing facility that will start production in 2010. The move is said to be in anticipation of a rise in demand from power generation companies.

The firm had planned to start production with a capacity of 3,000MW, but K. Venkatramanan, president, engineering and construction projects, and a member of the L&T board, had earlier said that the firm would “ramp up production capacity" depending upon “market conditions".

“L&T is taking a long-term view of the power sector. However, the issue of fuel linkages is worrying us—(these) are already affecting some of the power projects in the country. If this is not addressed it may affect the power generation plans which in turn might slow down demands," said Hitul Gutka, an analyst at Mumbai-based India Infoline Ltd.

L&T and Mitsubishi have entered into a JV to set up a Rs750 crore manufacturing facility for super-critical boilers.

Utpal Bhaskar in New Delhi contributed to this story.