Bombardier, Siemens, GE, Alstom, EMD at war over Rs 40,000-cr locomotive market

In eight years, Indian Railways wants to be in a position to issue a ticket within five minutes of a traveller demanding it. For anyone who comes across this idea enshrined in a report titled Vision 2020, the road ahead is absurdly simple: technology would help issue more tickets to passengers at their doorstep through an array of devices.

But the Railways, even as it gets to that part about delivering the ticket, also has to deal with the fact that it needs to be able to run enough trains to meet the massive demand for seats. It is obvious to anyone who travels by rail for the first time in India that the demand for seats is much more than the supply, which is why tourists get to shoot those postcard pictures of villagers travelling on top of trains.

By 2020, the Railways needs to procure 5,334 diesel locomotives and 4,281 electric locos, spending an estimated Rs 1,20,000 crore. Given that its production units are overburdened, the Railways has decided to procure locos through public private partnerships. The Railways also does not have the resources to adequately fund its massive capital expansion needs on its own, given a surging wage bill which has significantly inflated its overheads.

The Railway Board will soon finalise a tender, to be opened in a few months, for procurement of electric locomotives vis-a-vis a joint venture with the private sector in Madhepura in Bihar. Another tender for a similar diesel loco manufacturing plant may also happen this year. Together, the two contracts are said to be worth around Rs 40,000 crore spread over a supply period of 10 years.

Keen to Join the Bandwagon

According to the plan, the Railways will provide land while the selected bidder would set up the infrastructure and assure a roll-out for a given number of years. The Railways plan to acquire around 800 electric locos from the private sector player. The modalities of the diesel loco project are being worked out. Given the massive procurement plans of the Railways, India has become an exciting market for international manufacturers.

This is why Bombardier, Siemens, GE, AlstomBSE -0.33 % and EMD have all become aggressive about their presence here. Several cities in India are also constructing Metro rail system, which opens up an additional market for these companies which manufacture coaches, locomotives, signalling systems, etc.

Bombardier for instance has set up a new Railway vehicle manufacturing site at Savli, Vadodara, Gujarat, as well as a propulsion systems manufacturing facility and software development centre for signalling and traction applications in Vadodara.

GE India has announced plans to set up a facility that will also manufacture diesel locomotives in Maharashtra with an investment of Rs 1,000 crore. “We are targeting India. We will participate in the tender to be floated soon by the Indian Railways for 1,000 electric locomotives. We are willing to offer 10% cheaper rates than other companies,” Alstom’s locomotive platform director Jean-Marc Tessier had said in an interview earlier in France. While EMD has been a long-standing technology partner for diesel locomotives with the Railways, Siemens too plans to cash in on the opportunity.

Slow, But Not Steady

For the Railways, these tenders would mean a generational change in the way it approaches procurement. As of now, the national transporter manufactures its own locomotives and coaches as well as relies on imports. However, the idea of assuring a massive off-take to two private players is something that the usually conservative railway board is slowly waking up to.

As of now, the Railways has the least amount of exposure to the private sector among other infrastructure segments. Critics have often accused the board of moving at a snail’s pace in opening the doors to companies. Although the two projects were approved in 2006 during the regime of Lalu Prasad, the projects could never take-off on account of procedural issues. In 2008, after getting the cabinet approvals, the Railways floated tenders for setting up a diesel loco factory in Marora and an electric loco factory at Madhepura.

The tender ran into controversy as only GE submitted a bid for the diesel locos. railway officers say at that point, they were in no position to grant the contract as it would then be perceived to have been given on nomination, which would have been in conflict with CAG norms. There have also been sharp differences among Railway Board members over these contracts with some officers having objected to the manner in which the concessions were being devised.

Yet to Gather Steam

Taking into account the kind of infighting taking place at the Railway Board over these projects, the Prime Minister’s Office has started demanding time-bound action on these projects. However, the bureaucratic tussles at the board are still coming in the way of a quick closure of the issue. Recently, there was a debate on whether the winning bidder would be paid an advance for the first set of locos that they would import prior to setting up the facility in India.

A member of the board who retired recently has floated a strongly worded note objecting to such practices. On the controversy, Railway Board member (electrical), Kul Bhushan declined to comment. “The tender should be out soon and we are working towards it. Please appreciate that we are following the due process,” he said.’

There is also a talk about the turf war between the electrical and mechanical wings of the Railway Board. It is said that the mechanical department, which was earlier the sole guardian of locomotives, is unhappy that the electrical wing has got a huge role in this area of expertise due to the rising demand for electric locomotives over diesel locos.’

Globally, All’s Charged Up

This is a phenomenon taking place across the world with several countries going in for electric locomotives although a majority in use today run on diesel. The International Railway Journal says there are around 47,000 electric locomotives currently in operation worldwide with an average age of around 27 years. While the proportion of electric locomotives has increased considerably in the past few years, diesel traction remains dominant. Electric locomotives account for less than 30% of all locomotives worldwide.

After Delhi metro, Bombardier looks to supplying railways

After metro cars and signalling systems, Bombardier Transportation is now looking to tap Indian Railways’ growing need for electric multiple unit (EMU) cars for inter-city EMU trains. The global rail vehicle manufacturing company is preparing itself to bid for the coming tenders for this.

“While we are doing well in the supply of metro cars to the Delhi Metro Rail Corporation (DMRC), we now want to go for Indian Railways and bid for locomotives, EMU cars and inter-city EMU trains. We will accordingly consolidate our Savli plant if we win bid of the ministry of railways in future,” said Harsh Dhingra, whole-time director and chief country representative – India at Bombardier Transportation

While the company doesn’t manufacture EMU cars or trains in India as of now, it does assemble locomotives at its Savli facility near Vadodara in Gujarat as part of its agreement with Electro-Motive Diesel (EMD), a subsidiary of Progress Rail Services Corporation, a Caterpillar company. The facility currently has a capacity of one metro car a day.

Talking about expansion of metro car capacity, Dhingra said, “Our expansion will depend on future orders. While we have bid for third phase of Delhi Metro, we will be submitting bids for second phase of Bangalore Metro, apart from Kochi, Ahmedabad-Gandhinagar and Mumbai metro projects.”

According to Dhingra, Bombardier estimates an order book of 500 metro cars from Delhi, 300 from Bangalore, 100 each from Kochi and Ahmedabad-Gandhinagar and about 120-150 from Mumbai metro projects.

The company expects demand for metro cars in the country to touch 2,000 in next 5 years. By next year, Bombardier is planning to begin exporting its locomotives to countries in regions like South East Asia as well as Pacific. Moreover, while currently Bombardier’s signalling office and the software development centre are also located at Savli, Vadodara, which develops software for signalling and traction applications, the company is readying to provide traffic management systems (TMS) for Indian Railways.

Meanwhile, as for the Metrolink Express for Gandhinagar-Ahmedabad (MEGA) project, Bombardier Transportation has qualified for bidding for rolling stock and signalling system.

Railway Board plans to buy high-speed trains at Rs.550 crore a piece

The Indian railways needs at least Rs.10 lakh crore to enhance its safety measures and another Rs.1.25 lakh crore to complete 129 key projects.

These financial hiccups, however, have not stalled the flight of ambition of the railway board, which has prepared a proposal to buy highspeed trains, which can travel up to 200 km per hour, at the cost of Rs.550 crore per train.

The “speed-up high quality coach trains” are proposed to run on the Delhi-Mumbai route. The ambitious plan, involving an expenditure of Rs.10,587 crore for 20 speed-up trains, has triggered a debate in the railway department with several members finding the project unfeasible given the current condition of the railways.

The feasibility study, presented in the railway board meeting on November 1, also took into account the additional cost of three to four thousand crore rupees that would be incurred in setting up the infrastructure to run the high-speed trains.

The feasibility proposal (a copy of which is with Mail Today) has evoked sharp criticism from former board members and railway brass, with some sniffing a “scam” and “favouritism” to a particular company.

“It is learnt that companies like Altstom, Bombardier and Siemens are in the race to grab the contract. Japanese giants in the field – Hitachi, Kawasaki and Mitsubishi – are also not far behind. Incidentally, the feasibility study for these trains was sponsored by Japan’s ministry of economy, trade and industry (METI),” a board member said.

Many questioned the proposal’s viability at a time when the railways is struggling to complete several pending projects. A senior board member pleading anonymity said: “There are several pending issues which need urgent attention and are affecting the daily operations of the railways. If we can run a highquality train at the cost of Rs.60-70 crore, including the locomotive cost, why are we going for the high-speed trains which are 10 times more expensive? The proposal is impractical given we don’t have proper tracks to run even 100 km/hr speed trains.”

The total cost earned from passenger fare per train will not even be enough to pay the interest of the loan required to buy these trains. “Had it been an investment it would have been a feasible approach. But that is not the case,” the board member said. “Besides the Rs.11,000 crore cost of the train, also consider the expenditure on the tracks.

The cost of one km track for such high-speed train will be equivalent to the cost of 20 km of normal coach tracks in use in the country. I don’t approve of the proposal, so do many other members in the board,” the board member added.

Former general manager in the railways, R.C. Sethi, said: “You (the railway board) are dreaming a technological leap when you don’t have the strength to even walk properly on the ground.”

Former railway board member (mechanical) R.C. Acharya questioned the “extravagance” saying: “It seems to me to be an attempt by vested interests to push the railways into a horrendously expensive initiative.”

“Rather than taking up such projects, the railways should push pending projects, enhance line capacity and consolidate its bread winner – the freight operations,” Acharya added.

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Published in: on November 17, 2012 at 11:34 am  Leave a Comment  
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Spanish wagon maker makes India tracks

Spanish rolling stock maker CAF hopes to set up a manufacturing unit in the country given its increasing scope for business in the metro railway segment. A final decision in this regard is expected by next year.

Rolling stock comprises all the vehicles that move on a railway, usually including both powered and unpowered vehicles.

CAF (Construcciones y Auxiliar de Ferrocarriles), along with its joint-venture partner MELCO, has been awarded a contract for nearly Rs 800 crore to supply 14 rakes (84 coaches) to the East West Metro project in Kolkata. Previously, the company supplied eight rakes for the Airport-link of the Delhi Metro.

“We do have plans to start a manufacturing unit here. We are scouting suitable locations for setting up the unit,” Mr Juan Jose Garcia, International Division Area Director, CAF told Business Line. Mr Garcia, however, declined to speak on possible locations for the upcoming unit, the expected investment and product details. “We are a listed company in Spain and are bound by regulatory issues,” he said.

Global rolling stock majors such as Bombardier and Alstom have already built capacities in India to tap the urban rapid mass transport segment.

According to Mr Garcia, CAF, currently the fourth largest rolling stock maker in the world, has already bid for orders from upcoming metro rail projects in Hyderabad (L&T Metro Rail, Hyderabad) and Jaipur. In Hyderabad, it expects contracts for 42 rakes of three cars each. Details of the Jaipur project are yet to be finalised.

For the East West Metro in Kolkata, some rakes will be imported from Spain while others will be manufactured locally. CAF has also bid for the North-South extension project to be carried out by the Kolkata Metro authorities.

Bombardier to supply 74 new metro coaches

NEW DELHI: Bombardier Transportation of Germany has won an order for 74 ‘Movia’ metro cars from the Delhi Metro Rail Corporation. The contract is valued at about Rs. 5.3 billion and includes an option of a further 40 cars.

According to Bombardier officials, deliveries will follow the completion of existing contracts. “With the contract now signed DMRC will be operating a large fleet of 498 Movia metro cars, benefiting from scale of economies in both acquisition and maintenance costs,” said a company official.

In Phase II expansion of the Delhi Metro, the modern Bombardier Movia high-capacity vehicles will transport almost 4 million passengers every day. “The success of the Movia car is acknowledged by the majority of operators around the world. This is evident with more than 3,800 Movia metro cars ordered from the company to date,” said the official.

The Movia metro vehicles integrate the world’s most advanced technologies in metro vehicle manufacturing such as stainless steel car bodies and ‘Mitrac’ propulsion and control system.