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India awards $5.6bn rail contracts to GE, Alstom
November 10, 2015, 7:36 am

A train enters a railway station in Mumbai, India, June 26, 2014. Mumbai's rail network carries up to 7.24 million passengers per day [Xinhua]

A train enters a railway station in Mumbai, India, June 26, 2014. Mumbai’s rail network carries up to 7.24 million passengers per day [Xinhua]

Indian Railways have awarded contracts to global giants GE and Alstom for the setting up of about $5.6 billion worth diesel and electric locomotive factories in central Indian cities of Marhora and Madhepura marking the first major FDI in rail projects.

General Electric and Alstom were issued the letters of award for the high value contract acceptance letters, according to a senior Railway Ministry official Anil Saxena.

The mega projects, approved since 2007 by the then Indian Railway Minister Lalu Prasad, got mired in controversies, years of red tape and indecision by successive ministers, finally saw the light of the day.

The contract agreements with both GE and Alstom will be signed in a month, the railway official said in New Delhi.

The projects involve manufacturing of 1000 diesel locomotives and 800 electric locomotives over the next 10 years.

US multi-national GE is expected to manufacture the 1,000 locomotives over 10 years, in a deal worth $2.6 billion. While 100 will be imported, rest will be manufactured in the central Indian state of Bihar as part of the Make in India initiative.

GE said in a statement it will be investing $200 million in a plant and maintenance sheds.

French major Alstom will manufacture 800 high power electric locomotives locos in the next 10 years, in a deal worth $3 billion.

Alstom will manufacture 12,000 HP electric locomotives to be used for heavy haulage.

With the Indian government allowing 100 per cent FDI in Railways, the setting up of the two locomotive plants in joint venture mode is crucial for the public transporter in order to boost its infrastructure.

Indian Railways will have 26 per cent equity and also provide land while the global players will have 74 per cent equity in each of the plant.

India’s state-owned railways are the fourth-largest in the world. The railways cost the Indian government around $5 billion a year in subsidies.

Indian Prime Minister had promised last year to seek foreign and private funding for the Indian railways.

Indian railways have suffered from years of low investment and populist policies that have kept fares low.

TBP and Agencies