India says work on GE's locomotive factory on track

By Neha Dasgupta

NEW DELHI (Reuters) - U.S. firm General Electric's plan to build a diesel locomotive factory in eastern India is on track, the railways minister said on Thursday, seeking to allay concerns that the state-controlled network was making changes to the contract.

Piyush Goyal's comments came after GE said this week that the Indian government's 'Make in India' initiative would be undermined if the railway ministry went ahead with plans to only use electric engines.

"Work in factory is going on as per plan," he told reporters.

GE had won a $2.6 billion contract in 2015 to supply Indian Railways with 1,000 diesel locomotives and began work on a plant in one of the largest direct foreign investment projects.

But the railways ministry said last week it wouldn't need diesel after all - hoping to save on fuel and maintenance costs - and suggested GE might want to make electric engines instead.

GE has investments in India's power, healthcare and transportation sectors.

The policy shift raised fears for the future of investments in the country, especially Prime Minister Narendra Modi's indigenisation drive to create tens of thousands of jobs for a swelling workforce.

But Goyal said the government had no plans to make sudden changes in policy and there was no threat to the GE plant in eastern India.

"Our government does not make any sudden changes in policy...we take considered decisions...The Marhowra factory is being set up and I think it's on track."

He said he had fruitful discussions with GE executives and had asked them to explore cutting costs.

Electric engines are usually used for passenger trains, while diesel is used for freight. Around 25-30 percent of India's locomotives are diesel-engined.

GE has already shipped its first diesel locomotive to India and is completing the factory in the state of Bihar. It has created around 1,000 jobs at the plant and a maintenance shed, and 5,000 jobs in the supplier network.

(Reporting by Neha Dasgupta, Writing by Sanjeev Miglani and Rajesh Kumar Singh; Editing by Shri Navaratnam)