Railway Minister Piyush Goyal on $2.6 bn GE locomotive deal: Some terms may get tweaked

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Published: September 29, 2017 6:24:58 AM

Indian Railways (IR) wasn’t contemplating to abandon the $2.6-billion diesel locomotive project at Marhowra in Bihar being implemented by General Electric (GE), railway minister Piyush Goyal said on Thursday.

Piyush Goyal, Piyush Goyal on GE locomotive deal, Indian Railways, General Electric, locomotive project, Boston-based GE, Railway Board, diesel locomotive, IR-GE contractUS firm asked to tweak engines to cut emission and consider exports. (Image: PTI)

Indian Railways (IR) wasn’t contemplating to abandon the $2.6-billion diesel locomotive project at Marhowra in Bihar being implemented by General Electric (GE), railway minister Piyush Goyal said on Thursday, but he hinted that some terms of the contact with the US company would need slight tweaking. The minister’s statement allayed fears that the transporter’s plan to accelerate the pace of electrification of routes could make the Marhowra plant redundant and IR must invoke the exit clause in the agreement with GE. Goyal told media persons that IR and GE were considering options including exports of some of the diesel-fired engines and making them more fuel-efficient to reduce pollution. Goyal, who had discussed the issue with GE vice-chairman John Rice here on Wednesday, said the challenge was to meet the “twin objectives of reducing pollution, saving costs and making sure that the contract continued to serve the people of India in the best interest of the nation”.

While GE had said earlier the project was on track, analysts expressed consternation at the government’s rethink on a contract awarded to the US company just two years ago. Abandoning the project would send wrong signals to global investors at a time when private corporate investments in India were sputtering and foreign direct investments were relatively robust, analysts noted.

In a statement on Tuesday, the Boston-based GE said that if Indian officials walked away from the deal, it twill damage efforts to create jobs and altering it will “undermine one of the most promising infrastructure projects in the country”. Recently, Goyal decided to double IR’s electrification target for the current year to 8,000 km and electrify all routes at the earliest. It is estimated that the railways will save around `8,000 crore in fuel bills annually if all its routes are electrified.

Under the IR-GE contract, the multinational firm is required to supply the transporter with 1,000 diesel locomotives over 11 years at a basic cost of Rs 14,656 crore. Simultaneously, France’s Alstom is building an electric locomotives plant at Madhepura in Bihar with an assured offtake of 800 units by IR at a basic cost of Rs 19,904 crore. A former Railway Board member had told FE earlier that the railways would find it difficult to bridge its locomotives deficit if diesel locomotives were being phased out as per the government’s latest plan.

Electric engines are usually used for passenger trains, while diesel is used for freight. More than a quarter of IR’s locomotive fleet is diesel-fired. GE has already shipped its first diesel locomotive to India and is completing the factory at the agreed pace. It has created around 1,000 jobs at the plant and a maintenance shed, and 5,000 jobs in the supplier network.

Minister of state for railways Manoj Sinha said, “There will be no danger to the GE (project),” but he hastened to add that “it’s no rocket science to convert a diesel locomotive to an electric one. If it can happen in Varanasi, then it can happen anywhere.”

(With agency inputs)

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