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Two mega rail engine projects get just one bidder each

Two mega rail engine projects get just one bidder each

New Delhi: German engineering services company Siemens AG and US-based conglomerate General Electric Co. (GE) have emerged as the sole bidders in separate contracts for an ambitious $6 billion (Rs29,220 crore) Indian Railways project to manufacture electric and diesel locomotives.

Three of the five companies in the running for the project have not bid amid concerns about the terms and the efforts of the railways in the last two months to accelerate the project announced two years ago.

A government official, who did not want to be named, said that if the railways did go ahead and award the project to Siemens and GE for two factory tenders, it could raise uncomfortable questions on the price quoted by the winning bidder in the absence of any competition.

Most company officials did not want to be named because the bid process was still “live".

On 3 February, Mint had reported that railway minister Lalu Prasad planned to fast-track proposals for this project. The railways confirmed that it had received only one bid each for the factory tenders.

The project envisages manufacturing electric locomotives at Madhepura and diesel ones at Marora, both in Bihar, the home state of Prasad. GE bid for the diesel locomotive factory; Siemens for the electric locomotive one.

The shortlisted companies that failed to submit bids were Bombardier Transportation India Ltd, a unit of Canada’s Bombardier Inc., and France’s Alstom SA for the electric locomotive project and EMD Locomotive Technologies Pvt. Ltd, a subsidiary of the US-based Electro-Motive Diesels Inc., for the diesel project.

“There is a possibility that the players didn’t see that this is going to happen in such a short period of time. Otherwise most of those players should have bid. Most of the companies were very keen on the project," said Arvind Mahajan, an executive director with audit and consulting firm KPMG Advisory Services Pvt. Ltd.

An official handling one of the tenders said that GE would be awarded the contract since its competitors had failed to submit a bid. “This is final as the others have not submitted their bids," he said on the condition of anonymity.

Confirming that GE had submitted a price bid, a GE spokesperson said, “We submitted what we consider a competitive bid for the diesel locomotive tender Indian Railways issued in September 2008... We remain cautiously optimistic that Indian Railways will consider our bid favourably. Next steps in the bidding process will be determined by Indian Railways and the government, we eagerly await their decision."

Alstom and Siemens officials did not respond to emails seeking comment. A Siemens executive, who did not want to be identified, confirmed that the company had submitted a bid, but refused to share more details.

Another Railway Board official handling the electric locomotives contract said that while Siemens was the only company to submit a bid, another company had sought an extension.

Refusing to disclose the name of the company, this official said, on condition of anonymity: “There is no precedent as such of allowing others now, but there are a number of ways of taking such circumstances into consideration."

Technically, the railways can award the projects despite receiving only one bid each, though some ministries, such as the roads ministry, have chosen to approach the cabinet to clear the awards of such projects.

An official from one of the companies participating in the electric locomotives tender said they had submitted a letter to the Railway Board putting across their “point of view" on the tender.

However, he insisted the letter was not a protest note and was only an effort to get some clarifications from the ministry.

The railways had issued revised draft request for proposals (RFPs)—essentially guidelines for final price bids—in the last week of January, with a deadline of 16 February. This was finalized when the Cabinet Committee on Economic Affairs cleared the project on 5 February, which some companies claim left them with very little time.

The winning bidder is decided based on the price they bid per locomotive, with all other costs, including maintenance costs, built into the price.

The projects were cleared for investment as joint ventures on 5 February despite the objections by the ministry of finance over many of the conditions laid down in the bids.

The clearances came after a round of inter-ministerial consultations to take the project forward.

The two projects—estimated at a combined $6 billion—include a procurement contract as well as a 15-year maintenance component, where the railways would pay 3.25% of the cost of the locomotive every year to the winning bidder for maintenance.

The winning bidder was also required to build a township, school and hospitals near the factory.

Railway equipment manufacturer GE Transportation, a unit of GE, will tie up with state-owned Bharat Heavy Electricals Ltd (Bhel) to manufacture the diesel locomotives, provided it wins the order estimated to be worth more than Rs10,000 crore.

“Once the tender is awarded to us, we (Bhel) are looking at a total investment of Rs1,000 crore," he said.


Utpal Bhaskar contributed to this story.

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