India’s Rs 8,500-crore railway locomotives market is set for a mega upheaval with the government awarding the contracts for the Madhepura and Marhowra factories to General Electric (GE) and Alstom in a Rs 36,000-crore deal — the country’s first foreign direct investment (FDI) in the rail sector.
Once commissioned over the next two to three years, the two factories to come up in Bihar would supply 200 locomotives of 6,000 horsepower (HP) and 12,000 HP annually to Indian Railways, adding to the existing supply of 650 locos of 4,000-6,000 HP.
“That translates into more than doubling the trailing-load-capacity of freight trains without having to use extra engines per train,” said R Sivadasan, former Railway Board financial commissioner, who had overseen the preliminary discussions on the Bihar projects.
Trailing load refers to the maximum tonnage volume that can be hauled by a freight train and it depends on the propulsion strength of the locomotive being used. Indian Railways’ freight trains currently carry a maximum trailing load of 3,900 tonnes.
“The new 12,000-HP engines will catapult this capacity to an average 10,000 tonnes per train — similar to Chinese railways,” Sivadasan added.
India currently manages to achieve higher trailing loads only by using extra two to three low HP engines per train.
Indian Railways operates 10,500 locomotives to haul both passenger and freight trains at present. The transporter inducted 647 locomotives in its fleet in the last financial year at a cost of Rs 8,465 crore, around a half of its total expenditure of Rs 17,376 crore on rolling stock. This included 397 diesel locos purchased from Diesel Locomotive Works (DLW) at Varanasi and 250 electric engines from Chittranjan Locomotive Works (CLW) in West Bengal.
In 2015-16, railways plans to induct 636 locos (375 diesel and 261 electric). While the expenditure on locos is budgeted to remain flat at around the same level as 2014-15, railways’ total rolling stock expenditure is expected to go up 12 per cent to Rs 19,342 crore, indicating higher budgeted expenditure for acquisition of wagons and coaches.
Experts say with the two new factories at Madhepura and Marhowra in two years, making available additional 200 locomotives and the supply from CLW and DLW getting ramped up to 700 locos, total locomotives supply for Indian Railways would cross 800-900 annually. That, however, does not translate into a surplus scenario.
“There is not likely to be a huge demand-supply mismatch. India is now trying to increase freight loading multifold as economy continues to grow at 7-8 per cent; DFCC (Dedicated Freight Corridor Corporation) corridors will start getting commissioned 2018 onwards and also a lot of old locos will gradually retire,” said Amrit Pandurangi, senior director at Deloitte.
He added the new locomotives would be a game changer with better technology, higher fuel efficiency, and increased haulage power. “In addition, the higher speeds of the new locos will play a critical role as we move towards separation of freight traffic from passenger lines,” said Pandurangi.
Experts point out the expected ramp up in domestic demand might not allow an export scenario to develop. Also, the new locos will be designed for Indian broad gauge that is not used in a majority of other countries, which have already moved on to standard gauge in rail networks.
“There is a possibility of utilizing the Madhepura plant for exports but our primary focus is to meet the obligations of this contract and to meet the expectations of Indian railways in terms of product delivery and quality. Hence we are not envisaging any major exports from this plant at this point of time,” Bharat Salhotra, Managing Director at Alstom Transport which bagged the contract for the Madhepura electric loco factory told Business Standard.
The efficiency gains from new locos would come at a cost that is almost double the price Indian Railways pays for existing DLW and CLW locomotives. According to Salhotra, the price for each locomotive churned out by the Madhepura factory works out to Rs 28.4 crore. “However, there is an expectation of a 3 per cent reduction in the price year-on-year. So, the overall average price works out to Rs 24.88 crore per locomotive,” he said.
This price is in stark contrast to the cost of electric locos delivered by CLW – Rs 13 crore per engine. A former Railway Board Chairman said the doubling of price is justified in view of the double trailing load capacity the new locos will provide.
“Also, it must be remembered that the contract for new locos includes maintenance for the first 500 locos too. That is a major gain for Indian Railways,” he said. GE would supply 1000 diesel locos over ten years at a basic cost of Rs 14,656 crore from Marhowra while Alstom would deliver 800 locos over 11 years at a cost of Rs 21,389 crore from Madhepura.
|THE BIG FDI PUSH|