India needs a lot of capacity addition in years to come, says Alain Spohr

At a time when India is planning huge investments in signalling, electrification and metro rail, Alain Spohr, managing director, Alstom India & South Asia, talks to Shine Jacob about the company's roadmap. While betting big on the merger with Siemens, Spohr also sees huge growth in the Indian market with the upcoming infrastructural projects. Edited excerpts: 

Last year, Alstom and Siemens had agreed to merge the rail business globally. What is the status of that? 

We are in the process of getting non-compete clearances from various organisations. In the meantime, it is business as usual for us, particularly in the Indian market, we are strongly competing for some major ongoing tenders. We expect the deal to close by the end of this year.
 

How will this merger benefit you in markets like India? 

I think a major cause of concern for consumers in India is that the capacity and capability of manufacturing does not match the requirement of the country. This is when we talk about coaches, electrification and signalling. I think India will require a lot of capacity addition in the coming years. Combining two organisations like Siemens and Alstom, which are quite complementary to each other's business, works well — particularly in the Indian context. 

What are your major concerns as an investor in India? 

First, you have to be ready to face fair competition in an open market. In tenders that we submit, we can be very competitive and offer good solutions to our customers. Alstom does not want privileged treatment; we look forward to having a level playing ground in India. When I speak about fair game, I see too many closed specifications. In fact, our customer should specify what they want as a final product. They should specify what they want and should accept proven solutions to achieve those specifications, instead of getting into details of how that specification has to be achieved. That's what you call open specifications. The second concern is regarding financing. An open financing promotes open competition, which will enable customers to get good solutions at competitive pricing at the end.
 

The third concern is GST. The intention of GST is excellent — it cleaned up some of the outdated taxation policies and gave businesses a boost. For many years in this country, we had these small indirect taxes, which were state specific. I am really happy that it is over because it was a nightmare. There is, however, one major gap in the GST regarding rolling stock equipment. Currently, GST input credit rates are higher than the output GST on rolling stock. The surplus GST credit, which is non-refundable, is a cost for domestic rolling stock manufacturers, which is almost 7 per cent of sales price. It dilutes the intent of GST implementation, where, in fact, domestic players are loaded with extra costs because of this imbalance between incoming GST and outgoing GST. I am convinced the mistake is not intentional, but somebody should look at it and address it quickly.

You recently announced the completion of first electric locomotive from Madhepura. What is the status of the plan to supply 800 electric double-section locomotives to Indian Railways? 

Madhepura is an exceptional achievement. India as a country should be proud of this project, especially the way it was sub-contracted and executed as a partnership with the Indian Railways. I have been involved in four factory projects in the country over the years and Madhepura has been the most impressive one. I believe it should be a big example for ease of doing business in India, considering the speed of its execution. We never had any interference from anyone. This is a true Make in India initiative. 

As per contractual schedule, Alstom had to deliver one electric locomotive last financial year, which was done on time. This financial year, we are supposed to deliver four more eLocos, two of which will be ready for delivery in the next couple of months. At this pace, our deliveries are running as per schedule. The plan is to roll out 50 locomotives by 2019 and post-testing, the production will be increased to 130-150 each year till completion of the order. According to the contract, we have been set timelines till 2029. The production capacity of Madhepura is 200 twin section locomotives per annum. This capacity can be extended to 50 per cent more as and when required. If Indian rail wants to go faster, we are ready for it. 

These PRIMA (Wag 12) engines can hold a four-km train with just these two engines. I don't think it has happened anywhere in India.

Indian Railways is opening up with a lot of other business opportunities too with the speed of infrastructure projects. How are you looking at it? 

We participate in almost every tender and development, which are relevant to us. Of course, we want to get involved in infrastructure projects such as the massive electrification drive ongoing in the country. Also, signaling will be a big game in India, where we have huge potential. 

What is your take on the Rs 1 trillion ambitious signal revamping plan by the railways? 

To be frank, people talk about it but nobody has real plans on how to do it. When I see worldwide, I don't see such an ambitious plan has ever existed for such a technology. Having said that, Alstom will be happy to partner with Indian Railways as and when relevant projects come up. How to deal with this, with existing infrastructure, is a big challenge. When things are clear in this regard, Alstom will be part of it. It is a huge challenge since it goes beyond the capability of what India can do and beyond what can be done worldwide. We have to understand what is the real plan and organise ourselves. 

You have to be ambitious, you have to challenge yourselves, but in a realistic way. You have to face what are the real difficulties and complications, you have to have a clear understanding of the customer - of what he expects and what you can do. It does not mean downgrading your ambitions.