Indian Railways Scraps Joint Venture Plans for Factories

Feb. 23 (Bloomberg) -- Indian Railways, the state-run network that carries 15 million people daily, abandoned joint venture plans for factories to make locomotives and railcars after failing to identify partners.

The monopoly will now build the factories on its own, Home MinisterPalaniappan Chidambaram told reporters after a cabinet meeting in New Delhi today.

General Electric Co.'s India unit had planned to build a diesel engine factory in collaboration with Indian Railways and state-run Bharat Heavy Electricals Ltd. if it won the contract for the program.

Indian Railways is seeking to add trains to carry more freight and passengers in the world's second-most populous nation as more of its 1.2 billion people traverse the seventh- biggest country by area.

The cabinet approved the setting up of a diesel locomotive factory at Marhowra, Bihar, as a fully owned unit of the Indian Railways at a cost of 20.5 billion rupees ($413 million), the minister said. The factory will make 150 locomotives a year.

Indian Railways will also build a wholly owned railcar plant at Rae Bareilly in Uttar Pradesh with an investment of 16.85 billion rupees, Chidambaram said. The factory will build 1,000 railcars a year.

The cabinet also approved the proposal by Indian Railways to set up a factory as a "departmental production unit" to build electric locomotives at Madhepura in Bihar state, following a failed bid to attract joint venture partners.

"In response to the Ministry of Railways Request for Proposals, only one, non-compliant bid was received," the government said in a release today. "Bidders have represented that the joint venture model represents insurmountable challenges and risks."

The government didn't give any details about the bid.

Before the factories start production, Indian Railways proposes to import 50 electric and 50 diesel locomotives over the next three years, Chidambaram said.

 

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