Marking the first big FDI in the railway sector, the Indian Railways on Monday signed Rs 40,000-crore contracts with GE and Alstom to set up two locomotive plants in Bihar with a view to boosting manufacturing and employment in the state.
Terming it as the "first major" manufacturing investment in Bihar, Finance Minister Arun Jaitley said setting up of diesel and electric locomotive factories will benefit farmers."It is a major manufacturing investment in India... And when GE and Alstom start investing in Bihar, I think it's good days for 'Make in India'. India is going to benefit, the Railways is going to benefit, Bihar is going to benefit," he said.
He was speaking at the formal contract signing ceremony for the two Rs 40,000-crore modern locomotive joint venture factory projects. He also said "very soon, you will hear about contracts and tenders which will be out with regard to private sector participation in modernisation of 400 select railway stations".
"Both these activities are going to generate a lot of economic activities. Obviously, the quality of the Indian Railways is going to improve," he added.
He said it is a win-win situation for Bihar because one of the greatest challenges for India is to boost the economy of the state.
"There will be job creation. Their taxes can improve. This will create an ecosystem where you will have ancillary units and service providers," he said.
Jaitley termed the move as "a certainly important contract" at entry point into the railway system by international majors like GE and Alstom, which have a mandate to manufacture ecologically-friendly locomotives. The electric locomotive factory will be set up at Madhepura and the diesel one at Marhowrah in Bihar. The project was originally approved by the Cabinet in 2006.
Last year, the government had relaxed FDI norms in the railway sector.
The Finance Minister said that gradually private sector investments are picking up in the country and will further grow in coming months. DIPP Secretary Amitabh Kant termed it as the biggest contract awarded by the Indian Railways to the private sector in its history.
"This contract will create jobs and bring state-of-the-art technology in the sector. It will drive manufacturing and Make in India," Kant said, adding that "this will bring in FDI and create jobs besides development of backward region".
Alstom (Transport) President Henri Poupart-Lafarge said the company will deliver 800 locomotives and the company is going to launch the project "very shortly". The investments will start from 2016 and the site will be ready for delivery of the first locomotive in 2018 or early 2019.
"We expect globally an investment of 200 million euros...we are going to create 1,000 jobs within Alstom and more than 3,000 overall, including suppliers," he said.
GE Transportation CEO Jamie Miller said it is the largest project for the company. Speaking on the occasion, Minister of State for Railways Manoj Sinha said the government will safeguard the interest of local farmers.
According to Railway Minister Suresh Prabhu, the whole process of awarding this contract was "very transparent".
"The projects will help in creating jobs. Its spin-off benefits will be huge. Ancillary units would also come," Prabhu said.
This project is dubbed as the first big-ticket project under 'Make in India' initiative in the railway sector.
While it will cost Rs 2,052 crore for setting up the diesel locomotive factory at Marhowra, the electric one will cost Rs 1,293.57 crore at Madhepura. The projects involve manufacturing of 1,000 diesel locomotives and 800 electric locomotives over the next 10 years.
The US multi-national GE, the lowest bidder for the Marhowra diesel locomotive factory, is expected to manufacture 1,000 locomotives over 10 years. While 100 will be imported, the rest will be manufactured as part of the Make in India initiative. French major Alstom, the lowest bidder for the Madhepura electric locomotive factory, will manufacture 800 high-power electric locomotives locos in the next 10 years.
Earlier this month, Indian Railways achieved an important milestone when it awarded Letters of Acceptance (LoA) for setting up two modern locomotive factories Diesel Locomotive Factory (DLF) at Marhowra and the other Electric Locomotive Factory(ELF) at Madhepura. These two factories are the excellent example of biggest 'Make in India' initiative ever undertaken by Indian Government.
Marhowra will manufacture and supply modern diesel electric locomotives of 4,500 HP and 6,000 HP (which in combination can operate as 9,000 HP and 12,000 HP multiple units).
Madhepura plant will manufacture and supply modern electric locomotives of high horse power namely 12,000 HP.
Under the agreement, 1,000 diesel locos will be manufactured in a period of 11 years with a basic cost of Rs 14,656 crore and 800 electric locos will be manufactured in a period of 11 years at a basic cost of Rs 19,904 crore, Railway Ministry statement said.
These modern powerful state of the art locos will be useful for heavy haul freight operations and mega freight operations in the dedicated freight corridor and for pan India operation, it said. These projects will usher in new technologies into the Indian industry at large through high paced indigenisation.
The Joint Venture Partners for the projects were to be selected through an International Competitive Bidding (ICB) process. The equity of the Ministry of Railways (MoR) in the Joint Venture Company would be limited to 26 per cent or Rs 100 crore whichever is lower.
The Ministry would provide land for the factory on lease to the Joint Venture Company for a period of 30 years in accordance with the conditions specified in the land lease agreement.
The factory of the Joint Venture Company would continue to function as a going concern beyond the specified supply period of 11 years and would be able to conduct business in a manner as it decides and would be governed by the relevant provisions of the Company's Act, 2013. The Ministry would continue to hold an equity of not less than 10 per cent in the JV Company until the supply period.
Thereafter, the Ministry would have the option to exit from the Company. It would be free to produce additional locomotives over and above the assured off-take for the Indian Railways, for other customers during the supply period. The maintenance facilities created by the Company would revert back to the Indian Railways on completion of the maintenance obligations of maintaining a specified number of locomotives for a specified period.