Railways may scrap diesel loco bid

Railway Board to decide on the matter.

Within a week of floating tenders for setting up two locomotive manufacturing joint venture (JV) plants, one each for diesel and electric locomotives, the railways are likely to go for it alone.

While the railways got no bid for the electric locomotive manufacturing unit, they got one from General Electric (GE) of the US, for the diesel locomotive plant.

The bidding parameter for both the plants is the price at which the loco would be supplied in the first year, after which the prices are to fall according to a pre-specified formula in the bid documents.

The diesel plant will produce 1,000 locomotives (in the 4,500 HP and 6,000 HP range) over 10 years and the winner will also get a repair and maintenance contract for these locos for another 15 years; the electric plant is to produce 800 locomotives (of 12,000 HP range).

A decision on whether the railways should go ahead on their own will be taken by the Railway Board later this week. Two years ago, when the railways first mooted the proposal to set up locomotive manufacturing facilities, they wanted to do it alone. But they were persuaded to go the public-private partnership (PPP) route and look for JV partners instead, since it would lower costs and also ensure better quality.

So, if this decision is taken, it will represent a complete U-turn in the railways’ philosophy over the past few years.

The ostensible reason why a section of the railways is in favour of manufacturing diesel locomotives on their own is that since there was only one bidder, there is no way of knowing if the price quoted is correct.

Electro Motive Diesel (EMD), the only other manufacturer of diesel locos in the world, asked for some more time in view of the global financial crisis.

This is also believed to be the reason why none of the three big global manufacturers of electric locos bid. Also, according to sources in the railways, there also appears to be some technical mistake in the GE bid.

When this was pointed out, however, the company said it was a mathematical error and has agreed, in writing, to accept that the price of its locomotives be lowered by the extent of the error — for all the locos. This adds up to around Rs 300 crore over the life of the project.

Prior to the bid, the railways set up an internal committee to examine what would be the cost if the plant was to be set up on its own.

Sources say the GE bid for diesel engines is below the cost arrived at by this committee. The Railway Board will now take a call based on this. The other option, apart from producing the locos on its own, is to import them for the next year and then call for new bids when global financial conditions improve.