Daily Management Review

$5.6 Billion Indian Railway Contract Won by France's Alstom US’s GE


11/10/2015




$5.6 Billion Indian Railway Contract Won by France's Alstom US’s GE
French engineering company Alstom will supply 800 electric locomotives and set up a local manufacturing plant worth a total of $3 billion (200 billion rupees). This decision was taken at by the Indian government on Tuesday.
 
India opened up limited parts of state owned railways last year and this is considered to be the largest awarded to a foreign firm since the opening up of the railways sector. The government has allowed 100 percent foreign direct investment in an effort to modernize its vast but outdated rail network. 

Another contract was awarded to the US company General Electric to supply India with diesel locomotives over the next 11 years which is estimated to be worth $2.6 billion.
 
As the vast but partly outdated state-owned network looks to foreign companies to help to modernize the Indian Railways, General Electric and Alstom have won contracts worth a combined $5.6 billion (4 billion pounds) to supply India's railways with new locomotives.
 
The French company Alstom would set up a factory in the eastern state of Bihar to manufacture and supply 800 electric locomotives which would also help in maintenance of the new rakes, railways spokesman Anil Saxena told Reuters on Tuesday. The total value of the contract and the new factory is about 200 billion rupees (2 billion pounds), he said.
  
More than 1,000 diesel locomotives would be supplied by GE over the next 11 years to the Indian railways even as the company would invest $200 million in a plant and maintenance sheds. The total value of the deal between GE and the Indian government is worth $2.6 billion and is the biggest investment of the U.S. company in India.
 
The Indian railways network is believed to the fourth largest in the world and the newly elected government in India is trying to modernize the largest transport network of the country. The contracts are viewed as part of that effort which is expected to overhaul the train network.
 
"In most of our growth markets, localisation is typically a key part of any infrastructure deal we do," Jamie Miller, chief executive officer of GE Transportation, told on Monday, reports Reuters.
 
Rival manufacturers such as Canada's Bombardier Inc and Germany's Siemens were co bidders for the projects and GE and Alstom won the contract amidst stiff competition.
 
The Indian government, under the newly elected Prime Minister Narendra Modi, is keen to upgrade the country's infrastructure and has plans to invest $137 billion on its railways by 2020. This policy has been sped up by the opening up of limited parts of the state-owned network to private and foreign investment, luring manufacturers hungry for contracts.
 
"It will bring this technology to a market that needs it. For them, this is really aligned with 'Make in India,' " GE's Miller said.
 
On a daily basis more than 23 million people use the railway network and is considered to be the lifeline of Indian transport. The railway network also offers some of the world's cheapest fares to help poor people travel across the country.
 
While the state owned Indian railways has struggled to generate money to invest and modernize, leaving an ageing and congested network where trains run at an average speed of just 50 kilometers (31 miles) per hour, the outdated system of the railways often results in accidents and late running of trains.
 
A formal agreement is to be signed between GE and the Indian government as the com-any confirmed that it had received a letter of award from India. Construction of the new factory would follow the signing of the agreement.
 
Alstom and its Indian subsidiary were not immediately available for comment.

(Sources: www.economictimes.indiatimes.com & www.reuters.com) 






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