The formal contract agreement signing
ceremony for the two Rs.40,000/- crores High Horse Power HI-TECH best-in-class
modern locomotive Joint Venture factory projects (Electric
Locomotive Factory at Madhepura and Diesel Locomotive Factory at
Marhowra - Bihar) took place today i.e. on 30.11.2015 in New Delhi. This
signifies a giant leap for the nation’s biggest ever “Make in India”
initiative. The signing ceremony took place in the august presence of Union
Minister for Finance, Corporate Affairs and Information & Broadcasting, Shri
Arun Jaitley, Union Minister of Railways, Shri Suresh Prabhakar Prabhu,
Union Minister for Communication & Information Technology Shri Ravishankar
Prasad, Union Minister of State for Skill Development and Entrepreneurship
(Independent Charge), and MoS Parliamentary Affairs Shri Rajiv Pratap Rudy, Union
Minister of State for Micro Small and Medium Enterprises, Shri Giriraj Singh, Union
Minister of State for Railways Shri Manoj Sinha, Union Minister of State for
Drinking Water and Sanitation Shri Ram Kripal Yadav, Former Union Minister and
Member of Parliament Shri Sharad Yadav and other Members of Parliament hailing
from Bihar including Shri Rajesh Ranjan (Shri Pappu Yadav) also graced
the occasion. It is a momentous occasion for
Indian Railways as well as for the nation. The signatories to the contract agreement
for Madhepura factory were Shri Sudheer Kumar, Executive Director (Electrical
Development) Railway Board and Shri Bharat Salhotra, MD, ALSTOM Transport
India. The signatories to the contract agreement for Marhowra factory were Shri
Jayant Kumar, Director (Mechanical Works), Railway Board and Shri Nalin Jain,
MD, GE Transport India.
On this occasion, Ambassador of France to India H.E. Mr. Francois Richier, Chairman,
Railway Board, Shri A.K. Mital, Member Electrical Railway Board Shri Navin
Tandon, Member Mechanical Railway Board Shri Hemant Kumar, Financial
Commissioner Railways Shri S. Mookerji, Member Staff Railway Board Shri Pradeep
Kumar, Secretary, Department of Industrial Policy and Promotion (DIPP), GoI
Shri Amitabh Kant, both the JV partners(of the two proposed locomotive
factories) namely CEO, M/s GE TRANSPORT, USA Ms Jamie Miller; CEO, M/s ALSTOM,
FRANCE Mr. Henri Poupart-Lafarge were among those present.
Earlier this month, Indian Railways
achieved an important milestone when it awarded Letters of Acceptance(LoA) for
setting up two modern locomotive factories – one Diesel Locomotive Factory
(DLF) at Marhowra and the other Electric Locomotive Factory(ELF) at Madhepura,
both in Bihar. These two factories are the excellent example of biggest “Make
in India” initiative ever undertaken by Indian Government. While the contract
for DLF Marhowra has been awarded to a USA – based Company M/s GE Global Sourcing
India Pvt. Limited, the contract for Madhepura ELF has been awarded to a France
– based Company M/s Alstom Manufacturing India Limited. These two factories
also mark the flow of FDI in the Railway sector.
DLF Marhowra will manufacture and supply
modern diesel electric locomotives of 4500 HP and 6000 HP (which in combination
can operate as 9000 HP and 12000 HP multiple units). ELF Madhepura will
manufacture and supply modern electric locomotives of high horse power namely
12000 HP. Under the agreement, 1000 diesel locos will be manufactured in a
period of 11 years with a basic cost of Rs.14,656 crore and 800 electric locos
will be manufactured in a period of 11 years at a basic cost of Rs.19904
crore. The cost of setting up factories is around Rs.1300/- each. Taking into
account the cost of setting up factories and maintenance facilities, these two
projects together are worth Rs.40,000/- crore.
These modern powerful state of the art
locos will be useful for heavy haul freight operations and mega freight
operations in the dedicated freight corridor and for pan India operation.
These factories would lead to substantial development of ancillary
manufacturing units, generation of direct and indirect employment and
substantial development in the region.
These two factories are joint ventures (JV)
of the Ministry of Railways. The fair, transparent and competitive bidding
process adopted in selecting the JV partner received wide-spread appreciation
from all stakeholders. These projects will usher in new technologies into the
Indian industry at large through high paced indigenization.
Speaking
on the occasion, Union Minister for Finance,
Corporate Affairs and Information & Broadcasting, Shri Arun Jaitley said
“that today is really a win win occasion for all the
stakeholders. I think this is one step which has been taken by Indian Railways
which is literally going to benefit everyone. First of all it is going to
benefit the Indian Railways itself. We had a very old Railway system in India
which is on its way towards improvement. Some aspects are becoming old and need
modernization and therefore Railways in the past and a half has been working on
a structured game plan in order to strengthen the railway infrastructure and
modernize the Railways as a whole. Lot of funds have been placed through the
budgetary resources and also long-term finance has been made available by the
LIC and we took momentous decision to invite both private partnership and FDI.
Setting up of these factories is an important milestone in the creation of the
Railway infrastructure and both these activities will channelize economic
activities. It is very important contract at entry point into the railway
system by international M/s like GE and Alstom who will be manufacturing these
ecologically friendly locomotives. It is a win win situation for Bihar as it
will boost the economy of Bihar. This is very big first major manufacturing
investment in Bihar and therefore as the Railway Minister said this will create
eco-system within ancillary unit services and will create huge opportunities of
employment and that is why everyone even the farmers will also benefit from
this activity. I have also a reason to be satisfied because it is a major
manufacturing investment as far as India is concerned because we have been
facing with a large number of domestic and global challenges. The slowdown of
the global economy at last has a visibly impact on our exports. So this is one
channel what we have to help in such scenario. There is also private sector
investment which has now started picking up. Despite a great adversity of two
successive years of poor monsoon and a combination of other factors which is
holding us back, we seemed to be overcoming these challenges and now have
reasons to be more than satisfied. We do have challengers but there are now
opportunities of private investment and FDI in public sector. Manufacturing has
achieved 9.3 % growth which is a significant figure. We will continue this
momentum”.
Speaking on the occasion, Minister of
Railways Shri Suresh Prabhakar Prabhu said that it is really a big feet
that these two projects have now been finalized in the most transparent manner.
Shri Suresh Prabhu pointed out that this could happen because the process of
decision making has been fast track now in Railway Ministry through delegation
and decentralization of power initiated by him not only to Members of Railway
Board but also to the levels of General Managers and also Divisional Railway
Managers. This expeditious decision to award contracts for these two factories
is also in line with the Hon’ble Prime Minister’s policy of best governance.
Shri Suresh Prabhu said that these factories will now lead to eco-system for
developing ancillary units which in turn will become part of global supply
chain and spur vertical and horizontal manufacturing activity. The other
spin-off of these two big ticket project will be to help in the increase of
GDP. Referring to the Morgan Stanely’s recent report on Indian Railways Shri Suresh
Prabhu pointed out that this report has categorical stated that Indian Railway
has now achieved the true potential of driving country’s economy in a big way. He
said that these two locomotive factories, which is a joint venture, are set up
for inducting high horse power freight locomotives into the Railway System for
improving the efficiency of operation in terms of increasing the speed of
freight trains, thereby improving the throughput capacity and also enhancing
line capacity. This would also help Indian Railways to benchmark its freight
train operation with the global trends of running freight trains. Referring to
the COP-21 Summit in Paris Shri Suresh Prabhu said that the entire world is
concerned about reducing emission and improving environment. He said the locos
being produced in these two factories are best in class and are expected to be
energy efficient and ecological friendly. It is really a best Make in India
Initiative. The Railway Minister pointed out that the bidding process followed
by the Ministry has been rated as the most transparent and efficient process by
the Industry. Even the agencies losing the bid have expressed appreciation and
satisfaction over the transparent process adopted by the Indian Railways. He
further stated that the requirement of maintaining the locomotive is to ensure
compliance to stringent performance parameters which would enable the Railways
to utilize the assets to its maximum utility.
Speaking
on the occasion, Minister of State for Railways Shri Manoj Sinha said that the
production of locos from these two factories will substantially increase the
speed of goods trains and will therefore change the freight moment scenario in
a big way. Shri Sinha said that his Government is always committed to the
protecting the interest of farmers and the youth. He said that these two
projects will lead to economic development and will generate direct and
indirect employment. These projects have been planned in the true spirit of
Make in India initiative of Hon’ble Prime Minister Shri Narender Modi. He also
appreciated the transparent manner adopted in awarding these contracts.
In
his speech, former Union Minister and Member of Parliament Shri Sharad Yadav
congratulated Govt. of India and Indian Railways for finally taking steps for
setting up these two factories which are quite useful not only for Bihar but
for the nation.
Speaking
on the occasion, the Chairman Railway Board Shri A. K. Mital while welcoming
the delegates and emphasizing on the need of ‘Make in India’ initiative stated
that these two projects would fulfill the multiple objectives for the country.
He stated that these locomotive factories are part of the process of network
consolidation and modernization unveiled by the Government. Explaining the
major highlights of the project, the Chairman, Railway Board stated that
Ministry of Railway is committed and have indomitable will to go all-out to
fulfill its part of this partnership whether it be providing of land, power
connection, rail/road connectivity and meeting its commitment towards
procurement of 1000 Diesel and 800 Electric Locomotives and whatever other
commitments are embodied in the agreement. Highlighting this big achievement of
the Railways, Shri A. K. Mital stated that Major spin-off benefits for the
Railways include optimization of our maintenance practices. At a policy level,
this builds a platform for a modern railway equipment industry that would help
to upgrade the technology periodically. He stated that locomotive factories
will also help develop ancillary industries in the country.
BRIEF ABOUT THE TWO FACTORIES
(a)
Background :-
The
Cabinet in December 2006 and February 2007 had approved setting up of the
Diesel Locomotive Factory at Marhowra, Bihar and Electric Locomotive Factory at
Madhepura, Bihar respectively through the Joint Venture Routes. The project
envisaged setting up of a factory each for manufacturing High Horse Power
Electric locomotives (12000 HP) and Diesel locomotives (4500/ 6000 HP) and also
development of maintenance facilities for maintenance of a specified number of
locomotives for a specified period. The scope of the project includes an
assured off-take of 1000 Diesel and 800 Electric locomotives to be procured
over a period of 11 years. The Joint Venture Partners for the projects were to
be selected through an International Competitive Bidding (ICB) process. The
equity of the Ministry of Railways (MoR) in the Joint Venture Company would be
limited to 26% or Rs 100 crore whichever is lower. Ministry of Railways would
provide land for the factory on lease to the Joint Venture Company for a period
of 30 years in accordance with the conditions specified in the land lease
agreement. The land for setting up of the maintenance facilities would be
licensed to the Company. The factory of the Joint Venture Company would
continue to function as a going concern beyond the specified supply period of
11 years and would be able to conduct business in a manner as it decides and
would be governed by the relevant provisions of the Company’s Act, 2013. The
Ministry of Railways would continue to hold an equity of not less than 10% in
the JV Company until the supply period. Thereafter, the Ministry would have the
option to exit from the Company. The Ministry of Railways would also have veto
rights on certain reserved matters governing the function of the Company during
the supply period. The Company would be free to produce additional locomotives
over and above the assured off-take for the Indian Railways, for other
customers during the supply period. The extension of land lease for the factory
beyond the initial period of 30 years would be decided by the Ministry of
Railways based on the conditions prescribed in the land lease agreement. The
maintenance facilities created by the Company would revert back to the Indian Railways
on completion of the maintenance obligations of maintaining a specified number
of locomotives for a specified period.
1.
Bidding process :-
In order to enable Ministry of Railways to select a Joint
Venture Partner for formation of the JV Company, a two stage bidding process
was adopted. The first stage called the ‘Request For Qualification’ (RFQ) stage
was for short-listing of bidders based on their technical and financial
capacity. The RFQ process was initiated by Ministry of Railways in May 2013, following
which four global leaders in the field of manufacturing locomotives were
shortlisted for participation in the financial bid stage. The bidding documents
comprising ‘Request For Proposal’ (RFP) and the Procurement-cum-Maintenance
Agreement (PCMA) was considered and approved by the Cabinet in Jan.’ 2014. The
RFP document along with the PCMA was issued to the shortlisted bidders in
February/ March 2015 and the financial bids were received in August/ September
2015. Following the evaluation of the bids received, Ministry of Railways has
identified the Selected Bidder and has awarded the contract to Alstom
Manufacturing India Limited for Electric Locomotives and GE Global Sourcing
Limited for Diesel Locomotives. The Bidding parameter was limited to a single
number i.e the Price of a locomotive with all other parameters being fixed
upfront as a percentage of the Price of Locomotive. This factor played an
important role in enabling a faster evaluation of the Bid proposal and
determining the Selected Bidder.
2.
Broad Project Contours:-
The eligibility condition ensured that Companies who have
design experience of producing and supplying locomotives were eligible for
participation in the bid process. Further, the financial strength of the
Company for executing such a large project was evaluated. The eligibility
criteria required that the applicant had supplied specified Horse Power of
Propulsion System in the preceding years of the application due date. Further,
the Company was required to have net worth of Rs. 250 crore for the last
Financial Year. The aforesaid eligibility criteria ensured that the Company
having adequate technical and financial capacity, participated in the financial
bid process. Further, it was necessary for the Company to own the Intellectual Property
Right (IPR) for the design of the Propulsion System. Provisions in the
Agreement would enable the Company to upgrade its technology over the long
supply period, in order to enable the Ministry of Railways have the state of
the art technology. By entrusting the Company, the obligation of maintaining
the locomotive up to the periodic overhaul and also providing a guaranteed
reliability and availability, enabled MoR to have a cost effective product
evaluated over its life cycle. Further, the provision of allowing import of
only a small proportion of the locomotives and the requirement of indigenous
production of a major proportion of locomotives would ensure development of
ancillary units, creation of jobs and also development of backward region. The
indigenous production would lead to reduction in costs and also make it a true
‘Make in India’ concept. This is captured through an annual 3% reduction of the
price of the locomotives commencing from the 4th Year of supply.
This model would enable India to transform it into a major hub for production
of locomotives and would develop a market for maintenance of locomotives. The
key performance indicators of ensuring a high level of availability and
reliability of the locomotives as part of maintenance obligation would lead to
better availability of the freight trains for further utilization. The latest
state of the art technology of the locomotives would also enable Ministry of
Railways to achieve considerable costs economies in operation and also improve
the throughput of freight trains. Additionally, the locomotives being energy
efficient and having capacity of regeneration would reduce the energy costs
which would translate in a reduced cost of operations.
3.
Comparison with Global Benchmarks
These locomotives would be best-in-class and would be of
high horsepower, with high energy efficiency) and reliability. These locos will
help railways improve its average speed of freight trains from the present
level of 25 kmph to about 50-60 kmph and thereby improve its throughput and
enhance line capacity.
Horse Power to trailing load ratio will improve from the
present value of 1:1 to 2:1. International benchmark of Horse Power to Trailing
load is more than two for freight operations. This factor enables faster
movement of freight trains thereby improving throughput and enhancing line
capacity.
The Guaranteed availability of locomotive is at least 95%
and reliability is one failure for every 200,000 Km (for Electric) / 75,000 Km
(for Diesel) of operation of a Locomotive. These performance bench marks are at
par with Global Standards.
4.
Price Discovery
The
price discovered for the latest state of the art technology works out to less
than the in-house production cost despite the investment in setting up of the
factory and the maintenance facilities by the JV Company.
5.
Project Benefit
The
projects will bring in private investment of about ₹ 1300 crore for each
project for setting up the locomotive factory and maintenance depots and bring
in state-of-the-art technology to Indian Railways to run heavy haul trains and
improve energy efficiency. This will help Indian Railways to modernize its
rolling stock and improve upon its 20 year old technology.
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AKS/DK