Seven weeks ago, when he held the additional charge of railway ministry, Prime Minister Manmohan Singh instructed railway board officials to fast-track bidding for setting up factories to manufacture electric and diesel locomotives in Bihar as this would generate jobs as well as lower costs significantly. The projects were first announced by former railway minister Lalu Prasad four years ago.
Yet, the projects keep getting postponed. Last week, bidding for the electric engine factory at Madhepura was postponed indefinitely. This is the tenth time it has been postponed. Bidding for the diesel locomotive unit has been postponed four times and all indications are that the same would happen on July 29 when the bids are scheduled to be submitted. Together both these projects are worth nearly R60,000 crore, including cost of constructing the plants and the estimated value of engine supply and maintenance contracts to be given to private firms over a 10-year period.
?We have to sort out issues. The new date will be announced after sorting out these issues,? railway board chairman Vinay Mittal told FE. A senior government official said, ?The diesel locomotive factory is at least six months behind the electric engine unit. There is no movement at all.?
The postponement has to be seen in the light of report of a committee on public procurement, headed by ex-chairman of Competition Commission of India Vinod Dhall, that dealt extensively with procurement by railways and other ministries. The report was submitted last month to the group of ministers on corruption led by finance minister Pranab Mukherjee.
According to the report, railways procures majority of its R20,000-crore annual requirement of equipment from a handful of pre-registered vendors ? registration of a vendor takes 286-530 days. As the report points out, while the Railways purchased diesel locomotives mainly from Electro Motive Diesel (EMD) of the US for R11.82 crore, it had received a bid of R11.62 crore from GE in 2009. The bid was rejected as GE was the only bidder at that time. While this difference in the bids seems small, it gets larger once the cost of maintaining 6,000 employees at the Diesel Locomotive Works (DLW) is taken into account. DLW assembles diesel locomotives based on supplies from companies such as EMD.
Railways purchased 230 electric locomotives and 280 diesel locomotives in 2010-11 from its production units Chittaranjan Locomotive Works (CLW) and Diesel Locomotive Works (DLW), which act as assembly plants only. The employee strength of CLW is 12,000 and DLW 6,000. The Dhall committee report points out that the value addition of these employees is miniscule ? against the production cost of R1,264 crore for 110 diesel locomotive of 4,000 horsepower in 2009-10, DLW spent R1,164 crore on purchase of subsystems and components from suppliers like EMD. The report says the situation at CLW is not very different.
Railway officials argue that the new plants would meet a bulk of the locomotive requirement and hence they could spell the end of DLW and CLW. This, however, is not correct as once the two proposed dedicated freight corridors ? eastern corridor from Ludhiana in Punjab to Dankuni in West Bengal and western corridor from Dadri in Uttar Pradesh to Jawaharlal Nehru Port in Maharashtra ? come up, the annual demand for diesel and electric locomotives would increase to 600 and 450, respectively, and a part of this would have to be sourced from DLW and CLW.
Four companies, namely GE, Alstom, Siemens and Bombardier, have been shortlisted for the electric engine unit, while the diesel locomotive factory has two suitors ? a consortium of GE and Bhel, and EMD.